Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change To List and Trade Shares of WisdomTree Put Write Strategy Fund Under Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3), 20038-20041 [2015-08447]
Download as PDF
<![CDATA[
20038
Federal Register / Vol. 80, No. 71 / Tuesday, April 14, 2015 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Brent J. Fields,
Secretary.
[FR Doc. 2015–08452 Filed 4–13–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74675; File No. SR–
NYSEArca–2015–05]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving a
Proposed Rule Change To List and
Trade Shares of WisdomTree Put Write
Strategy Fund Under Commentary .01
to NYSE Arca Equities Rule 5.2(j)(3)
April 8, 2015.
I. Introduction
On February 3, 2015, NYSE Arca, Inc.
(‘‘NYSEArca’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’ or
‘‘Exchange Act’’) 1 and Rule 19b-4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
WisdomTree Put Write Strategy Fund
(‘‘Fund’’). The proposed rule change
was published for comment in the
Federal Register on February 24, 2015.3
The Commission received no comments
on the proposal. This order approves the
proposed rule change.
II. Description of Proposed Rule Change
A. In General
The Exchange proposes to list and
trade the Shares under Commentary .01
to NYSE Arca Equities Rule 5.2(j)(3),
which governs the listing and trading of
Investment Company Units (‘‘Units’’) on
the Exchange.4 The Exchange may
generically list Units that meet all of the
requirements of Commentary .01. The
Exchange represents that the Fund and
the Index meet all of the requirements
of the listing standards for Units in Rule
5.2(j)(3) and the requirements of
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74290
(Feb. 18, 2015), 80 FR 9818 (‘‘Notice’’).
4 NYSE Arca Equities Rule 5.2(j)(3)(A) provides
that an Investment Company Unit is a security that
represents an interest in a registered investment
company that holds securities comprising, or
otherwise based on or representing an interest in,
an index or portfolio of securities (or holds
securities in another registered investment
company that holds securities comprising, or
otherwise based on or representing an interest in,
an index or portfolio of securities).
asabaliauskas on DSK5VPTVN1PROD with NOTICES
1 15
VerDate Sep<11>2014
17:42 Apr 13, 2015
Jkt 235001
Commentary .01, except the
requirements in Commentary
.01(a)(A)(1)–(5), which set forth
requirements for components of an
index or portfolio of US Component
Stocks.5 As discussed in the Notice, the
index underlying the Fund will consist
primarily of S&P 500 Index put options
(‘‘SPX Puts’’), which are not US
Component Stocks,6 and therefore the
index does not satisfy the requirements
of Commentary .01(a)(A)(1)–(5).
The Shares will be offered by the
WisdomTree Trust (‘‘Trust’’),7 a
registered investment company.
WisdomTree Asset Management, Inc.
will be the investment adviser
(‘‘Adviser’’) to the Fund.8 The Exchange
represents that the Adviser is not
registered as, or affiliated with, a brokerdealer. Mellon Capital Management will
serve as sub-adviser for the Fund (‘‘SubAdviser’’).9 State Street Bank and Trust
Company will be the administrator,
custodian and transfer agent for the
5 NYSE Arca Equities Rule 5.2(j)(3) defines the
term ‘‘US Component Stock’’ as an equity security
that is registered under Sections 12(b) or 12(g) of
the Act and an American Depositary receipt, the
underlying equity securities of which is registered
under Sections 12(b) or 12(g) of the Act.
6 NYSE Arca Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(5) provides that all securities in the
applicable index or portfolio shall be US
Component Stocks listed on a national securities
exchange and shall be NMS Stocks as defined in
Rule 600 under Regulation NMS of the Act. Each
component stock of the S&P 500 Index is a US
Component Stock that is listed on a national
securities exchange and is an NMS Stock. See
Notice, supra note 3, 80 FR at 9820, n.13. Options
are excluded from the definition of NMS Stock. The
S&P 500 Index consists of US Component Stocks
and satisfies the requirements of Commentary
.01(a)(A)(1)-(5). See id.
7 The Trust is registered under the Investment
Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940
Act’’). According to the Exchange, on December 15,
2014, the Trust filed with the Commission an
amendment to its registration statement on Form N–
1A relating to the Fund (File Nos. 333–132380 and
811–21864) (‘‘Registration Statement’’). In addition,
the Commission has issued an order granting
certain exemptive relief to the Trust under the 1940
Act. See Investment Company Act Release No.
28171 (October 27, 2008) (File No. 812–13458).
8 WisdomTree Investments, Inc. is the parent
company of WisdomTree Asset Management.
9 The Exchange further represents that the SubAdviser is affiliated with multiple broker-dealers
and has implemented a ‘‘fire wall’’ with respect to
such broker-dealers and their personnel regarding
access to information concerning the composition
and/or changes to the Index. In addition, according
to the Exchange, in the event (a) the Adviser or SubAdviser becomes registered as a broker-dealer or
newly affiliated with, a broker-dealer, or (b) any
new adviser or sub-adviser is a registered brokerdealer or becomes affiliated with, a broker-dealer,
the Adviser or any new adviser or Sub-Adviser or
new sub-adviser, as applicable, will implement a
fire wall with respect to its relevant personnel or
its broker-dealer affiliate regarding access to
information concerning the composition of and
changes to the Fund’s portfolio, and will be subject
to procedures designed to prevent the use and
dissemination of material, non-public information
regarding such portfolio.
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
Trust. Foreside Fund Services, LLC will
serve as the distributor for the Fund
(‘‘Distributor’’).
The Fund is an index-based exchange
traded fund (‘‘ETF’’) that will seek
investment results that before fees and
expenses, closely correspond to the
price and yield performance of the
CBOE S&P 500 Put Write Index
(‘‘Index’’). The Index was developed
and is maintained by the Chicago Board
Options Exchange, Inc. (‘‘CBOE’’ or the
‘‘Index Provider’’). Neither the Trust,
the Adviser, the Sub-Adviser, State
Street Bank and Trust Company, nor the
Distributor is affiliated with the Index
Provider.10
B. The Exchange’s Description of the
Fund
The Exchange has made the following
representations and statements in
describing the Fund and its investment
strategies, including other portfolio
holdings and investment restrictions.11
1. Principal Investments of the Fund
The Fund will seek investment results
that, before fees and expenses, closely
correspond to the price and yield
performance of the Index. The Index
tracks the value of a passive investment
strategy, which consists of overlaying
‘‘SPX Puts’’ over a money market
account invested in one and threemonth Treasury bills (‘‘PUT
Strategy’’).12
The Fund will invest at least 80% of
its assets in SPX Puts and short-term
U.S. Treasury securities.13 The Fund’s
investment strategy will be designed to
sell a sequence of one-month, at-themoney, SPX Puts and to invest cash at
10 See
Notice, supra note 3, 80 FR at 9819.
information regarding the Trust, the
Fund, and the Shares, including investment
strategies, risks, net asset value (‘‘NAV’’)
calculation, creation and redemption procedures,
fees, portfolio holdings disclosure policies,
distributions, and taxes, among other information,
is included in the Notice and the Registration
Statement, as applicable. See Notice, supra note 3
and Registration Statement, supra note 7.
12 The put-write strategy of selling cash-secured
SPX Puts has the potential to appeal to investors
who wish to add income and attempt to boost riskadjusted returns, in return for risking underperformance during bull markets. An investor who
engages in a cash-secured (i.e., collateralized) put
sales strategy sells (or ‘‘writes’’) a put option
contract and at the same time deposits the full cash
amount necessary for a possible purchase of
underlying shares in the investor’s brokerage
account. Additional information on the
methodology used to calculate the Index can be
found at: https://www.cboe.com/micro/put/
PutWriteMethodology.pdf.
13 The Treasury securities in which the Fund may
invest will include variable rate Treasury securities,
whose rates are adjusted daily (or at such other
increment as may later be determined by the
Department of the Treasury) to correspond with the
rate paid on one-month or three-month Treasury
securities, as applicable.
11 Additional
E:\FR\FM\14APN1.SGM
14APN1
Federal Register / Vol. 80, No. 71 / Tuesday, April 14, 2015 / Notices
one and three-month Treasury bill rates.
The number of SPX Puts sold will vary
from month to month, but will be
limited to permit the amount held in the
Fund’s investment in Treasury bills to
finance the maximum possible loss from
final settlement of the SPX Puts.
The SPX Puts will be struck at-themoney and will be sold on a monthly
basis on the Roll Date, (i.e., the same
Roll Date as that used by the Index),
which matches the expiration date of
the SPX Put options. At each Roll Date,
any settlement loss from the expiring
SPX Puts will be financed by the Fund’s
Treasury bill investments and a new
batch of at-the-money SPX Puts will be
sold. The revenue from their sale will be
added to the Treasury bill account. In
March quarterly cycle months, the
three-month Treasury bills will be
deemed to mature, and so the total cash
available will be reinvested at the threemonth Treasury bill rate. In other
months, the revenue from the sale of
puts will be invested separately at the
one-month Treasury bill rate.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
2. Other Investments of the Fund
While the Fund, under normal
circumstances,14 will invest in
investments as described above, the
Fund may also invest in other certain
investments as described below.
The Fund may invest its remaining
assets in short-term, high quality
securities issued or guaranteed by the
U.S. government (in addition to U.S.
Treasury securities) and non-U.S.
governments, and each of their agencies
and instrumentalities; U.S. government
sponsored enterprises; repurchase
agreements backed by U.S. government
and non-U.S. government securities;
money market mutual funds; and
deposit and other obligations of U.S.
and non-U.S. banks and financial
institutions (‘‘money market
instruments’’) 15 and derivative
14 The terms ‘‘under normal circumstances’’ and
‘‘normal market conditions’’ include, but are not
limited to, the absence of extreme volatility or
trading halts in the fixed income markets or the
financial markets generally; operational issues
causing dissemination of inaccurate market
information; or force majeure type events such as
systems failure, natural or man-made disaster, act
of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance.
In response to adverse market, economic, political,
or other conditions, the Fund reserves the right to
invest in U.S. government securities, other ‘‘money
market instruments’’ (as defined below), and cash,
without limitation, as determined by the Adviser or
Sub-Adviser. In the event the Fund engages in these
temporary defensive strategies that are inconsistent
with its investment strategies, the Fund’s ability to
achieve its investment objectives may be limited.
15 All money market instruments acquired by the
Fund will be rated investment grade, except that a
Fund may invest in unrated money market
instruments that are deemed by the Adviser or Sub-
VerDate Sep<11>2014
17:42 Apr 13, 2015
Jkt 235001
instruments or other investments. The
Fund may invest up to 20% of its net
assets (in the aggregate) in one or more
of the following investments not
included in the Index: S&P 500 ETF put
options,16 total return swaps on the
Index,17 S&P 500 Index futures
(including E-mini S&P 500 Futures), or
options on S&P 500 Index futures,18
whose collective performance is
intended to correspond to the Index.19
The Fund, may invest up to 10% of its
assets in over-the-counter S&P 500
Index put options (‘‘OTC S&P 500 Index
put options’’).
The Fund may invest up to 20% of its
assets in other exchange traded products
(‘‘ETPs’’), such as other ETFs, as well as
Adviser to be of comparable quality to money
market securities rated investment grade. The term
‘‘investment grade,’’ for purposes of money market
instruments only, is intended to mean securities
rated A1 or A2 by one or more nationally
recognized statistical rating organizations.
16 An index option gives its holder the right, but
not the obligation, to buy or sell a basket of stocks,
at an agreed upon price at or before a certain date.
An ETF option gives its holder the right, but not
the obligation, to buy or sell an exchange-traded
product, such as shares in an ETF, at an agreed
upon price, at or before a certain date.
17 To the extent practicable, the Fund will invest
in swaps cleared through the facilities of a
centralized clearing house. The Fund may also
invest in money market instruments that may serve
as collateral for the swap agreements. The Adviser
or Sub-Adviser will also attempt to mitigate the
Fund’s respective credit risk by transacting only
with large, well-capitalized institutions using
measures designed to determine the
creditworthiness of the counterparty. The Adviser
or Sub-Adviser will take various steps to limit
counterparty credit risk as described in the
Registration Statement. The Fund will enter into
over-the-counter non-centrally cleared instruments
only with financial institutions that meet certain
credit quality standards and monitoring policies.
The Fund may also use various techniques to
minimize credit risk, including early termination or
reset and payment, using different counterparties,
and limiting the net amount due from any
individual counterparty. The Fund generally will
collateralize over-the-counter non-centrally cleared
instruments with cash and/or certain securities.
Such collateral will generally be held for the benefit
of the counterparty in a segregated tri-party account
at the custodian to protect the counterparty against
non-payment by the Fund. In the event of a default
by the counterparty, and the Fund is owed money
in the over-the-counter non-centrally cleared
instruments transaction, the Fund will seek
withdrawal of the collateral from the segregated
account and may incur certain costs exercising its
right with respect to the collateral.
18 The futures contracts in which the Fund may
invest will be listed on exchanges in the U.S. Each
of the exchange-listed futures contracts in which
the Fund may invest will be listed on exchanges
that are members of the Intermarket Surveillance
Group (‘‘ISG’’).
19 For example, the Fund may invest in total
return swaps that create positions equivalent to
investments in SPX Puts and U.S. Treasury
securities. In a total return swap the underlying
asset to the swap agreement is typically an equity
index, loans or bonds. The Fund’s investments in
total return swap agreements will be backed by
investments in U.S. government securities in an
amount equal to the exposure of such contracts.
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
20039
in non-exchange-traded registered openend investment companies.20 The Fund
may invest in securities (other than U.S.
Treasury securities, described above)
that have variable or floating interest
rates which are readjusted on set dates
(such as the last day of the month or
calendar quarter) in the case of variable
rates or whenever a specified interest
rate change occurs in the case of a
floating rate instrument.
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of
Section 6 of the Act 21 and the rules and
regulations thereunder applicable to a
national securities exchange.22 In
particular, the Commission finds that
the proposal is consistent with Section
6(b)(5) of the Act,23 which requires,
among other things, that the Exchange’s
rules be designed to promote just and
equitable principles of trade, 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. The Commission also
finds that the proposal to list and trade
the Shares on the Exchange is consistent
with Section 11A(a)(1)(C)(iii) of the
Act,24 which sets forth Congress’ finding
that it is in the public interest and
appropriate for the protection of
investors and the maintenance of fair
and orderly markets to assure the
availability to brokers, dealers, and
investors of information with respect to
quotations for, and transactions in,
securities.
Quotation and last-sale information
for the Shares and any ETP in which it
invests will be available via the
Consolidated Tape Association (‘‘CTA’’)
high-speed line. In addition, the
Intraday Indicative Value (‘‘IIV’’) as
defined in NYSE Arca Equities Rule
5.3(j)(3), Commentary .01(c) will be
20 The Fund may invest in shares of both taxable
and tax-exempted money market funds. The ETPs
in which the Fund may invest all will be listed and
traded on U.S. registered exchanges. The Fund may
invest in the securities of ETPs registered under the
1940 Act consistent with the requirements of
Section 12(d)(1) of the 1940 Act or any rule,
regulation or order of the Commission or
interpretation thereof. The ETPs in which the Fund
may invest will be primarily index-based ETFs that
hold substantially all of their assets in securities
representing a specific index. The Fund will not
invest in leveraged (e.g., 2X, -2X, 3X, or -3X) ETPs.
21 15 U.S.C. 78f.
22 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
23 15 U.S.C. 78f(b)(5).
24 15 U.S.C. 78k–1(a)(1)(C)(iii).
E:\FR\FM\14APN1.SGM
14APN1
asabaliauskas on DSK5VPTVN1PROD with NOTICES
20040
Federal Register / Vol. 80, No. 71 / Tuesday, April 14, 2015 / Notices
widely disseminated at least every
fifteen seconds during the NYSE Arca
Core Trading Session by one or more
major market data vendors.25 On each
business day before commencement of
trading in Shares in the Core Trading
Session, the Trust will disclose for each
portfolio holding, as applicable to the
type of holding, the following
information on its Web site: Ticker
symbol, CUSIP number or other
identifier, if any; a description of the
holding (including the type of holding,
such as the type of swap); the identity
of the security, commodity, index or
other asset or instrument underlying the
holding, if any; for options, the option
strike price; quantity held (as measured
by, for example, par value, notional
value or number of shares, contracts or
units); maturity date, if any; coupon
rate, if any; market value of the holding;
and the percentage weighting of the
holding in the Fund’s portfolio. The
Web site information will be publicly
available at no charge.
In addition, a portfolio composition
file, which includes the security names
and quantities of securities and other
assets required to be delivered in
exchange for the Fund’s Shares, together
with estimates and actual cash
components, will be publicly
disseminated daily prior to the opening
of the Exchange via National Securities
Clearing Corporation. The NAV of the
Fund will be calculated as of the close
of trading (normally 4:00 p.m., Eastern
Time) on each day the Exchange is open
for business.
Information regarding market price
and trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services. Information regarding the
previous day’s closing price and trading
volume information for the Shares will
be published daily in the financial
section of newspapers. Intra-day,
closing and settlement prices of
exchange-traded portfolio assets,
including investment companies,
futures and options, will be readily
available from the securities exchanges
and futures exchanges trading such
securities and futures (as the case may
be), automated quotation systems,
published or other public sources, or
online information services such as
Bloomberg or Reuters. Quotation and
last-sale information for U.S. exchangelisted options is available via Options
Price Reporting Authority. Price
information on fixed income portfolio
25 The Exchange understands that several major
market data vendors display and/or make widely
available IIV taken from CTA or other data feeds.
VerDate Sep<11>2014
17:42 Apr 13, 2015
Jkt 235001
securities, including money market
instruments, and other Fund assets
traded in the over-the-counter markets,
including bonds and money market
instruments, is available from major
broker-dealer firms or market data
vendors, as well as from automated
quotation systems, published or other
public sources, or online information
services. In addition, the value of the
Index will be published by one or more
major market data vendors every 15
seconds during the NYSE Arca Core
Trading Session of 9:30 a.m. ET to 4:00
p.m. ET. Information about the Index
constituents, the weighting of the
constituents, the Index’s methodology
and the Index’s rules will be available
at no charge on the Index Provider’s
Web site at www.CBOE.com.
The Commission further believes that
the proposal to list and trade the Shares
is reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Exchange will obtain a representation
from the issuer of the Shares that the
NAV per Share will be calculated daily
and that the NAV will be made available
to all market participants at the same
time. Trading in Shares will be halted
if the circuit breaker parameters in
NYSE Arca Equities Rule 7.12 have been
reached or because of market conditions
or for reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable.26 The Exchange states that
it has a general policy prohibiting the
distribution of material, non-public
information by its employees. In
addition, the Exchange states that the
Adviser is not registered as, or affiliated
with, a broker-dealer and that, in the
event it becomes registered as a brokerdealer or newly affiliated with a brokerdealer, the Adviser will implement a
fire wall with respect to such brokerdealer function or affiliate regarding
access to information concerning the
composition and changes to the Fund’s
portfolio.27 The Exchange represents
26 These reasons may include: (1) The extent to
which trading is not occurring in the securities and/
or the financial instruments of the Fund; or (2)
whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly
market are present. With respect to trading halts,
the Exchange may consider all relevant factors in
exercising its discretion to halt or suspend trading
in the Shares.
27 See supra note 9. The Exchange states that an
investment adviser to an open-end fund is required
to be registered under the Investment Advisers Act
of 1940 (‘‘Advisers Act’’). As a result, the Adviser
and Sub-Adviser and their related personnel are
subject to the provisions of Rule 204A–1 under the
Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
that trading in the Shares will be subject
to the existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.28 The Exchange further
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange. Moreover, prior to the
commencement of trading, the Exchange
states that it will inform its Equity
Trading Permit Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares.
The Commission notes that the Shares
and the Fund must comply with the
initial and continued listing criteria in
NYSE Arca Equities Rules 5.2(j)(3) and
5.5(g)(2) for the Shares to be listed and
traded on the Exchange. The Exchange
represents that it deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. In support of this
proposal, the Exchange has also made
the following representations:
(1) The Shares conform to the initial
and continued listing criteria under
NYSE Arca Equities Rules 5.2(j)(3) and
5.5(g)(2), except that the Index will not
meet the requirements of NYSE Arca
Equities Rule 5.2(j)(3), Commentary
.01(a)(A)(1–5).29
ethics that reflects the fiduciary nature of the
relationship to clients, as well as compliance with
other applicable securities laws. Accordingly,
procedures designed to prevent the communication
and misuse of non-public information by an
investment adviser must be consistent with Rule
204A–1 under the Advisers Act. In addition, Rule
206(4)–7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment
advice to clients unless such investment adviser has
(i) adopted and implemented written policies and
procedures reasonably designed to prevent
violation, by the investment adviser and its
supervised persons, of the Advisers Act and the
Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review
regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i)
above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
28 The Exchange states that FINRA surveils
trading on the Exchange pursuant to a regulatory
services agreement and that the Exchange is
responsible for FINRA’s performance under this
regulatory services agreement.
29 The Index will include a minimum of 20
components, which is consistent with the
numerical requirement of NYSE Arca Equities Rule
5.2(j)(3), Commentary .01(a)(A)(4) (a minimum of 13
index or portfolio components).
E:\FR\FM\14APN1.SGM
14APN1
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 71 / Tuesday, April 14, 2015 / Notices
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(3) FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares, exchange-listed
equity securities, futures contracts, and
exchange-traded options contracts with
other markets and other entities that are
members of ISG, and FINRA, on behalf
of the Exchange, may obtain trading
information regarding trading in the
Shares, exchange-listed equity
securities, futures contacts and
exchange-traded options contracts from
such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares, exchange-listed equity
securities, futures contacts and
exchange-traded options contracts from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
(4) Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Information Bulletin will discuss the
following: (a) the procedures for
purchases and redemptions of Shares in
creation units (and that Shares are not
individually redeemable); (b) NYSE
Arca Equities Rule 9.2(a), which
imposes a duty of due diligence on its
Equity Trading Permit Holders to learn
the essential facts relating to every
customer prior to trading the Shares; (c)
the risks involved in trading the Shares
during the Opening and Late Trading
Sessions when an updated IIV or Index
value will not be calculated or publicly
disseminated; (d) how information
regarding the IIV and Index Value is
disseminated; (e) the requirement that
Equity Trading Permit Holders deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (f) trading information.
(5) For initial and continued listing,
the Fund will be in compliance with
Rule 10A–3 under the Act,30 as
provided by NYSE Arca Equities Rule
5.3.
(6) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid assets (calculated at
the time of investment).
(7) A minimum of 100,000 Shares for
the Fund will be outstanding at the
commencement of trading on the
Exchange.
30 17
CFR 240.10A–3.
VerDate Sep<11>2014
17:42 Apr 13, 2015
Jkt 235001
(8) All futures contracts in which the
Fund may invest will be listed on U.S.
that are members of the ISG.
This approval order is based on all of
the Exchange’s representations,
including those set forth above and in
the Notice.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 31 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,32 that the
proposed rule change (SR–NYSEArca–
2015–05) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Brent J. Fields,
Secretary.
[FR Doc. 2015–08447 Filed 4–13–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74679; File No. SR–OC–
2015–01]
Self-Regulatory Organizations;
OneChicago, LLC; Notice of Filing of
Proposed Rule Change Relating to
Ownership and Control Reports
April 8, 2015.
Pursuant to Section 19(b)(7) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1, notice is hereby given that on
March 31, 2015, OneChicago, LLC
(‘‘OneChicago,’’ ‘‘OCX,’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change 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.
OneChicago has also filed this rule
change with the Commodity Futures
Trading Commission (‘‘CFTC’’).
OneChicago filed a written certification
with the CFTC under Section 5c(c) of
the Commodity Exchange Act (‘‘CEA’’)
on March 19, 2015.
31 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
33 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(7).
32 15
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
20041
I. Self-Regulatory Organization’s
Description of the Proposed Rule
Change
OneChicago is proposing to insert into
its Rulebook new OCX Rule 516 and
concurrently issue Notice to Members
(‘‘NTM’’) 2015–7. New OCX Rule 516
codifies the requirement that Clearing
Members submit to the Exchange
account information related to
reportable positions in OneChicago
Contracts. OneChicago currently
requires position-based reporting, but
has not previously codified this
requirement in the OCX Rulebook.2
Additionally, OneChicago is
concurrently issuing NTM 2015–7. The
NTM informs market participants that
OneChicago is adopting new OCX Rule
516. Additionally, the NTM explains to
market participants that OCX will
require Clearing Members to submit
CFTC Form 102A and 102B data in the
format required by the CFTC’s
Ownership and Control Reports
(‘‘OCR’’) Final Rule.3
The text of the proposed rule change
is attached as Exhibit 4 to the filing
submitted by the Exchange but is not
attached to the published notice of the
filing.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
OneChicago 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
self-regulatory organization has
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
New OCX Rule 516
OneChicago is proposing to amend
the OCX Rulebook to insert new OCX
Rule 516. OCX Rule 516 will require
Clearing Members to submit to the
Exchange account information related to
reportable positions in OneChicago
Contracts. OneChicago currently
requires such reporting, but has not
2 See
OCX NTM 2010–12.
Ownership and Control Reports, Forms
102/102S/40/40S and 71; Final Rule 78 FR 69178
(Nov. 18, 2013).
3 CFTC,
E:\FR\FM\14APN1.SGM
14APN1
]]>Agencies
[Federal Register Volume 80, Number 71 (Tuesday, April 14, 2015)]
[Notices]
[Pages 20038-20041]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-08447]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74675; File No. SR-NYSEArca-2015-05]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change To List and Trade Shares of WisdomTree Put Write
Strategy Fund Under Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3)
April 8, 2015.
I. Introduction
On February 3, 2015, NYSE Arca, Inc. (``NYSEArca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares (``Shares'') of the
WisdomTree Put Write Strategy Fund (``Fund''). The proposed rule change
was published for comment in the Federal Register on February 24,
2015.\3\ The Commission received no comments on the proposal. This
order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 74290 (Feb. 18,
2015), 80 FR 9818 (``Notice'').
---------------------------------------------------------------------------
II. Description of Proposed Rule Change
A. In General
The Exchange proposes to list and trade the Shares under Commentary
.01 to NYSE Arca Equities Rule 5.2(j)(3), which governs the listing and
trading of Investment Company Units (``Units'') on the Exchange.\4\ The
Exchange may generically list Units that meet all of the requirements
of Commentary .01. The Exchange represents that the Fund and the Index
meet all of the requirements of the listing standards for Units in Rule
5.2(j)(3) and the requirements of Commentary .01, except the
requirements in Commentary .01(a)(A)(1)-(5), which set forth
requirements for components of an index or portfolio of US Component
Stocks.\5\ As discussed in the Notice, the index underlying the Fund
will consist primarily of S&P 500 Index put options (``SPX Puts''),
which are not US Component Stocks,\6\ and therefore the index does not
satisfy the requirements of Commentary .01(a)(A)(1)-(5).
---------------------------------------------------------------------------
\4\ NYSE Arca Equities Rule 5.2(j)(3)(A) provides that an
Investment Company Unit is a security that represents an interest in
a registered investment company that holds securities comprising, or
otherwise based on or representing an interest in, an index or
portfolio of securities (or holds securities in another registered
investment company that holds securities comprising, or otherwise
based on or representing an interest in, an index or portfolio of
securities).
\5\ NYSE Arca Equities Rule 5.2(j)(3) defines the term ``US
Component Stock'' as an equity security that is registered under
Sections 12(b) or 12(g) of the Act and an American Depositary
receipt, the underlying equity securities of which is registered
under Sections 12(b) or 12(g) of the Act.
\6\ NYSE Arca Equities Rule 5.2(j)(3), Commentary .01(a)(A)(5)
provides that all securities in the applicable index or portfolio
shall be US Component Stocks listed on a national securities
exchange and shall be NMS Stocks as defined in Rule 600 under
Regulation NMS of the Act. Each component stock of the S&P 500 Index
is a US Component Stock that is listed on a national securities
exchange and is an NMS Stock. See Notice, supra note 3, 80 FR at
9820, n.13. Options are excluded from the definition of NMS Stock.
The S&P 500 Index consists of US Component Stocks and satisfies the
requirements of Commentary .01(a)(A)(1)-(5). See id.
---------------------------------------------------------------------------
The Shares will be offered by the WisdomTree Trust (``Trust''),\7\
a registered investment company. WisdomTree Asset Management, Inc. will
be the investment adviser (``Adviser'') to the Fund.\8\ The Exchange
represents that the Adviser is not registered as, or affiliated with, a
broker-dealer. Mellon Capital Management will serve as sub-adviser for
the Fund (``Sub-Adviser'').\9\ State Street Bank and Trust Company will
be the administrator, custodian and transfer agent for the Trust.
Foreside Fund Services, LLC will serve as the distributor for the Fund
(``Distributor'').
---------------------------------------------------------------------------
\7\ The Trust is registered under the Investment Company Act of
1940 (15 U.S.C. 80a-1) (``1940 Act''). According to the Exchange, on
December 15, 2014, the Trust filed with the Commission an amendment
to its registration statement on Form N-1A relating to the Fund
(File Nos. 333-132380 and 811-21864) (``Registration Statement'').
In addition, the Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act. See Investment
Company Act Release No. 28171 (October 27, 2008) (File No. 812-
13458).
\8\ WisdomTree Investments, Inc. is the parent company of
WisdomTree Asset Management.
\9\ The Exchange further represents that the Sub-Adviser is
affiliated with multiple broker-dealers and has implemented a ``fire
wall'' with respect to such broker-dealers and their personnel
regarding access to information concerning the composition and/or
changes to the Index. In addition, according to the Exchange, in the
event (a) the Adviser or Sub-Adviser becomes registered as a broker-
dealer or newly affiliated with, a broker-dealer, or (b) any new
adviser or sub-adviser is a registered broker-dealer or becomes
affiliated with, a broker-dealer, the Adviser or any new adviser or
Sub-Adviser or new sub-adviser, as applicable, will implement a fire
wall with respect to its relevant personnel or its broker-dealer
affiliate regarding access to information concerning the composition
of and changes to the Fund's portfolio, and will be subject to
procedures designed to prevent the use and dissemination of
material, non-public information regarding such portfolio.
---------------------------------------------------------------------------
The Fund is an index-based exchange traded fund (``ETF'') that will
seek investment results that before fees and expenses, closely
correspond to the price and yield performance of the CBOE S&P 500 Put
Write Index (``Index''). The Index was developed and is maintained by
the Chicago Board Options Exchange, Inc. (``CBOE'' or the ``Index
Provider''). Neither the Trust, the Adviser, the Sub-Adviser, State
Street Bank and Trust Company, nor the Distributor is affiliated with
the Index Provider.\10\
---------------------------------------------------------------------------
\10\ See Notice, supra note 3, 80 FR at 9819.
---------------------------------------------------------------------------
B. The Exchange's Description of the Fund
The Exchange has made the following representations and statements
in describing the Fund and its investment strategies, including other
portfolio holdings and investment restrictions.\11\
---------------------------------------------------------------------------
\11\ Additional information regarding the Trust, the Fund, and
the Shares, including investment strategies, risks, net asset value
(``NAV'') calculation, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions, and taxes,
among other information, is included in the Notice and the
Registration Statement, as applicable. See Notice, supra note 3 and
Registration Statement, supra note 7.
---------------------------------------------------------------------------
1. Principal Investments of the Fund
The Fund will seek investment results that, before fees and
expenses, closely correspond to the price and yield performance of the
Index. The Index tracks the value of a passive investment strategy,
which consists of overlaying ``SPX Puts'' over a money market account
invested in one and three-month Treasury bills (``PUT Strategy'').\12\
---------------------------------------------------------------------------
\12\ The put-write strategy of selling cash-secured SPX Puts has
the potential to appeal to investors who wish to add income and
attempt to boost risk-adjusted returns, in return for risking under-
performance during bull markets. An investor who engages in a cash-
secured (i.e., collateralized) put sales strategy sells (or
``writes'') a put option contract and at the same time deposits the
full cash amount necessary for a possible purchase of underlying
shares in the investor's brokerage account. Additional information
on the methodology used to calculate the Index can be found at:
https://www.cboe.com/micro/put/PutWriteMethodology.pdf.
---------------------------------------------------------------------------
The Fund will invest at least 80% of its assets in SPX Puts and
short-term U.S. Treasury securities.\13\ The Fund's investment strategy
will be designed to sell a sequence of one-month, at-the-money, SPX
Puts and to invest cash at
[[Page 20039]]
one and three-month Treasury bill rates. The number of SPX Puts sold
will vary from month to month, but will be limited to permit the amount
held in the Fund's investment in Treasury bills to finance the maximum
possible loss from final settlement of the SPX Puts.
---------------------------------------------------------------------------
\13\ The Treasury securities in which the Fund may invest will
include variable rate Treasury securities, whose rates are adjusted
daily (or at such other increment as may later be determined by the
Department of the Treasury) to correspond with the rate paid on one-
month or three-month Treasury securities, as applicable.
---------------------------------------------------------------------------
The SPX Puts will be struck at-the-money and will be sold on a
monthly basis on the Roll Date, (i.e., the same Roll Date as that used
by the Index), which matches the expiration date of the SPX Put
options. At each Roll Date, any settlement loss from the expiring SPX
Puts will be financed by the Fund's Treasury bill investments and a new
batch of at-the-money SPX Puts will be sold. The revenue from their
sale will be added to the Treasury bill account. In March quarterly
cycle months, the three-month Treasury bills will be deemed to mature,
and so the total cash available will be reinvested at the three-month
Treasury bill rate. In other months, the revenue from the sale of puts
will be invested separately at the one-month Treasury bill rate.
2. Other Investments of the Fund
While the Fund, under normal circumstances,\14\ will invest in
investments as described above, the Fund may also invest in other
certain investments as described below.
---------------------------------------------------------------------------
\14\ The terms ``under normal circumstances'' and ``normal
market conditions'' include, but are not limited to, the absence of
extreme volatility or trading halts in the fixed income markets or
the financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance. In response to
adverse market, economic, political, or other conditions, the Fund
reserves the right to invest in U.S. government securities, other
``money market instruments'' (as defined below), and cash, without
limitation, as determined by the Adviser or Sub-Adviser. In the
event the Fund engages in these temporary defensive strategies that
are inconsistent with its investment strategies, the Fund's ability
to achieve its investment objectives may be limited.
---------------------------------------------------------------------------
The Fund may invest its remaining assets in short-term, high
quality securities issued or guaranteed by the U.S. government (in
addition to U.S. Treasury securities) and non-U.S. governments, and
each of their agencies and instrumentalities; U.S. government sponsored
enterprises; repurchase agreements backed by U.S. government and non-
U.S. government securities; money market mutual funds; and deposit and
other obligations of U.S. and non-U.S. banks and financial institutions
(``money market instruments'') \15\ and derivative instruments or other
investments. The Fund may invest up to 20% of its net assets (in the
aggregate) in one or more of the following investments not included in
the Index: S&P 500 ETF put options,\16\ total return swaps on the
Index,\17\ S&P 500 Index futures (including E-mini S&P 500 Futures), or
options on S&P 500 Index futures,\18\ whose collective performance is
intended to correspond to the Index.\19\ The Fund, may invest up to 10%
of its assets in over-the-counter S&P 500 Index put options (``OTC S&P
500 Index put options'').
---------------------------------------------------------------------------
\15\ All money market instruments acquired by the Fund will be
rated investment grade, except that a Fund may invest in unrated
money market instruments that are deemed by the Adviser or Sub-
Adviser to be of comparable quality to money market securities rated
investment grade. The term ``investment grade,'' for purposes of
money market instruments only, is intended to mean securities rated
A1 or A2 by one or more nationally recognized statistical rating
organizations.
\16\ An index option gives its holder the right, but not the
obligation, to buy or sell a basket of stocks, at an agreed upon
price at or before a certain date. An ETF option gives its holder
the right, but not the obligation, to buy or sell an exchange-traded
product, such as shares in an ETF, at an agreed upon price, at or
before a certain date.
\17\ To the extent practicable, the Fund will invest in swaps
cleared through the facilities of a centralized clearing house. The
Fund may also invest in money market instruments that may serve as
collateral for the swap agreements. The Adviser or Sub-Adviser will
also attempt to mitigate the Fund's respective credit risk by
transacting only with large, well-capitalized institutions using
measures designed to determine the creditworthiness of the
counterparty. The Adviser or Sub-Adviser will take various steps to
limit counterparty credit risk as described in the Registration
Statement. The Fund will enter into over-the-counter non-centrally
cleared instruments only with financial institutions that meet
certain credit quality standards and monitoring policies. The Fund
may also use various techniques to minimize credit risk, including
early termination or reset and payment, using different
counterparties, and limiting the net amount due from any individual
counterparty. The Fund generally will collateralize over-the-counter
non-centrally cleared instruments with cash and/or certain
securities. Such collateral will generally be held for the benefit
of the counterparty in a segregated tri-party account at the
custodian to protect the counterparty against non-payment by the
Fund. In the event of a default by the counterparty, and the Fund is
owed money in the over-the-counter non-centrally cleared instruments
transaction, the Fund will seek withdrawal of the collateral from
the segregated account and may incur certain costs exercising its
right with respect to the collateral.
\18\ The futures contracts in which the Fund may invest will be
listed on exchanges in the U.S. Each of the exchange-listed futures
contracts in which the Fund may invest will be listed on exchanges
that are members of the Intermarket Surveillance Group (``ISG'').
\19\ For example, the Fund may invest in total return swaps that
create positions equivalent to investments in SPX Puts and U.S.
Treasury securities. In a total return swap the underlying asset to
the swap agreement is typically an equity index, loans or bonds. The
Fund's investments in total return swap agreements will be backed by
investments in U.S. government securities in an amount equal to the
exposure of such contracts.
---------------------------------------------------------------------------
The Fund may invest up to 20% of its assets in other exchange
traded products (``ETPs''), such as other ETFs, as well as in non-
exchange-traded registered open-end investment companies.\20\ The Fund
may invest in securities (other than U.S. Treasury securities,
described above) that have variable or floating interest rates which
are readjusted on set dates (such as the last day of the month or
calendar quarter) in the case of variable rates or whenever a specified
interest rate change occurs in the case of a floating rate instrument.
---------------------------------------------------------------------------
\20\ The Fund may invest in shares of both taxable and tax-
exempted money market funds. The ETPs in which the Fund may invest
all will be listed and traded on U.S. registered exchanges. The Fund
may invest in the securities of ETPs registered under the 1940 Act
consistent with the requirements of Section 12(d)(1) of the 1940 Act
or any rule, regulation or order of the Commission or interpretation
thereof. The ETPs in which the Fund may invest will be primarily
index-based ETFs that hold substantially all of their assets in
securities representing a specific index. The Fund will not invest
in leveraged (e.g., 2X, -2X, 3X, or -3X) ETPs.
---------------------------------------------------------------------------
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act \21\
and the rules and regulations thereunder applicable to a national
securities exchange.\22\ In particular, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Act,\23\ which
requires, among other things, that the Exchange's rules be designed to
promote just and equitable principles of trade, 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. The Commission also finds that the proposal to list and trade
the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii)
of the Act,\24\ which sets forth Congress' finding that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f.
\22\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\23\ 15 U.S.C. 78f(b)(5).
\24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------
Quotation and last-sale information for the Shares and any ETP in
which it invests will be available via the Consolidated Tape
Association (``CTA'') high-speed line. In addition, the Intraday
Indicative Value (``IIV'') as defined in NYSE Arca Equities Rule
5.3(j)(3), Commentary .01(c) will be
[[Page 20040]]
widely disseminated at least every fifteen seconds during the NYSE Arca
Core Trading Session by one or more major market data vendors.\25\ On
each business day before commencement of trading in Shares in the Core
Trading Session, the Trust will disclose for each portfolio holding, as
applicable to the type of holding, the following information on its Web
site: Ticker symbol, CUSIP number or other identifier, if any; a
description of the holding (including the type of holding, such as the
type of swap); the identity of the security, commodity, index or other
asset or instrument underlying the holding, if any; for options, the
option strike price; quantity held (as measured by, for example, par
value, notional value or number of shares, contracts or units);
maturity date, if any; coupon rate, if any; market value of the
holding; and the percentage weighting of the holding in the Fund's
portfolio. The Web site information will be publicly available at no
charge.
---------------------------------------------------------------------------
\25\ The Exchange understands that several major market data
vendors display and/or make widely available IIV taken from CTA or
other data feeds.
---------------------------------------------------------------------------
In addition, a portfolio composition file, which includes the
security names and quantities of securities and other assets required
to be delivered in exchange for the Fund's Shares, together with
estimates and actual cash components, will be publicly disseminated
daily prior to the opening of the Exchange via National Securities
Clearing Corporation. The NAV of the Fund will be calculated as of the
close of trading (normally 4:00 p.m., Eastern Time) on each day the
Exchange is open for business.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers. Intra-day, closing and settlement prices of
exchange-traded portfolio assets, including investment companies,
futures and options, will be readily available from the securities
exchanges and futures exchanges trading such securities and futures (as
the case may be), automated quotation systems, published or other
public sources, or online information services such as Bloomberg or
Reuters. Quotation and last-sale information for U.S. exchange-listed
options is available via Options Price Reporting Authority. Price
information on fixed income portfolio securities, including money
market instruments, and other Fund assets traded in the over-the-
counter markets, including bonds and money market instruments, is
available from major broker-dealer firms or market data vendors, as
well as from automated quotation systems, published or other public
sources, or online information services. In addition, the value of the
Index will be published by one or more major market data vendors every
15 seconds during the NYSE Arca Core Trading Session of 9:30 a.m. ET to
4:00 p.m. ET. Information about the Index constituents, the weighting
of the constituents, the Index's methodology and the Index's rules will
be available at no charge on the Index Provider's Web site at
www.CBOE.com.
The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Exchange will obtain a representation from the issuer of
the Shares that the NAV per Share will be calculated daily and that the
NAV will be made available to all market participants at the same time.
Trading in Shares will be halted if the circuit breaker parameters in
NYSE Arca Equities Rule 7.12 have been reached or because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.\26\ The Exchange states that it has
a general policy prohibiting the distribution of material, non-public
information by its employees. In addition, the Exchange states that the
Adviser is not registered as, or affiliated with, a broker-dealer and
that, in the event it becomes registered as a broker-dealer or newly
affiliated with a broker-dealer, the Adviser will implement a fire wall
with respect to such broker-dealer function or affiliate regarding
access to information concerning the composition and changes to the
Fund's portfolio.\27\ The Exchange represents that trading in the
Shares will be subject to the existing trading surveillances,
administered by the Financial Industry Regulatory Authority (``FINRA'')
on behalf of the Exchange, which are designed to detect violations of
Exchange rules and applicable federal securities laws.\28\ The Exchange
further represents that these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and federal securities
laws applicable to trading on the Exchange. Moreover, prior to the
commencement of trading, the Exchange states that it will inform its
Equity Trading Permit Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
---------------------------------------------------------------------------
\26\ These reasons may include: (1) The extent to which trading
is not occurring in the securities and/or the financial instruments
of the Fund; or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. With respect to trading halts, the Exchange may
consider all relevant factors in exercising its discretion to halt
or suspend trading in the Shares.
\27\ See supra note 9. The Exchange states that an investment
adviser to an open-end fund is required to be registered under the
Investment Advisers Act of 1940 (``Advisers Act''). As a result, the
Adviser and Sub-Adviser and their related personnel are subject to
the provisions of Rule 204A-1 under the Advisers Act relating to
codes of ethics. This Rule requires investment advisers to adopt a
code of ethics that reflects the fiduciary nature of the
relationship to clients, as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
\28\ The Exchange states that FINRA surveils trading on the
Exchange pursuant to a regulatory services agreement and that the
Exchange is responsible for FINRA's performance under this
regulatory services agreement.
---------------------------------------------------------------------------
The Commission notes that the Shares and the Fund must comply with
the initial and continued listing criteria in NYSE Arca Equities Rules
5.2(j)(3) and 5.5(g)(2) for the Shares to be listed and traded on the
Exchange. The Exchange represents that it deems the Shares to be equity
securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has also made the following
representations:
(1) The Shares conform to the initial and continued listing
criteria under NYSE Arca Equities Rules 5.2(j)(3) and 5.5(g)(2), except
that the Index will not meet the requirements of NYSE Arca Equities
Rule 5.2(j)(3), Commentary .01(a)(A)(1-5).\29\
---------------------------------------------------------------------------
\29\ The Index will include a minimum of 20 components, which is
consistent with the numerical requirement of NYSE Arca Equities Rule
5.2(j)(3), Commentary .01(a)(A)(4) (a minimum of 13 index or
portfolio components).
---------------------------------------------------------------------------
[[Page 20041]]
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares, exchange-listed equity securities,
futures contracts, and exchange-traded options contracts with other
markets and other entities that are members of ISG, and FINRA, on
behalf of the Exchange, may obtain trading information regarding
trading in the Shares, exchange-listed equity securities, futures
contacts and exchange-traded options contracts from such markets and
other entities. In addition, the Exchange may obtain information
regarding trading in the Shares, exchange-listed equity securities,
futures contacts and exchange-traded options contracts from markets and
other entities that are members of ISG or with which the Exchange has
in place a comprehensive surveillance sharing agreement.
(4) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit Holders in an Information Bulletin of the
special characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (a)
the procedures for purchases and redemptions of Shares in creation
units (and that Shares are not individually redeemable); (b) NYSE Arca
Equities Rule 9.2(a), which imposes a duty of due diligence on its
Equity Trading Permit Holders to learn the essential facts relating to
every customer prior to trading the Shares; (c) the risks involved in
trading the Shares during the Opening and Late Trading Sessions when an
updated IIV or Index value will not be calculated or publicly
disseminated; (d) how information regarding the IIV and Index Value is
disseminated; (e) the requirement that Equity Trading Permit Holders
deliver a prospectus to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a transaction; and (f)
trading information.
(5) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act,\30\ as provided by NYSE Arca
Equities Rule 5.3.
---------------------------------------------------------------------------
\30\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(6) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment).
(7) A minimum of 100,000 Shares for the Fund will be outstanding at
the commencement of trading on the Exchange.
(8) All futures contracts in which the Fund may invest will be
listed on U.S. that are members of the ISG.
This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \31\ and the
rules and regulations thereunder applicable to a national securities
exchange.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\32\ that the proposed rule change (SR-NYSEArca-2015-05) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------
\33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Brent J. Fields,
Secretary.
[FR Doc. 2015-08447 Filed 4-13-15; 8:45 am]
BILLING CODE 8011-01-P
