Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by NYSE Arca, Inc. Regarding Listing and Trading of the PIMCO Build America Bond Strategy Fund, 47045-47049 [2010-19083]

Download as PDF Federal Register / Vol. 75, No. 149 / Wednesday, August 4, 2010 / Notices Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://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 Web site 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 a.m. and 3 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–BATS– 2010–019 and should be submitted on or before August 25, 2010. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–19221 Filed 8–3–10; 8:45 am] BILLING CODE 8010–01–P [Release No. 34–62585; File No. SR– NYSEArca–2010–68] mstockstill on DSKH9S0YB1PROD with NOTICES July 28, 2010. 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 July 14, 2010, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. VerDate Mar<15>2010 16:26 Aug 03, 2010 Jkt 220001 The Exchange proposes to list and trade the shares of the following fund of the PIMCO ETF Trust (the ‘‘Trust’’) under NYSE Arca Equities Rule 8.600 (Managed Fund Shares): PIMCO Build America Bond Strategy Fund (the ‘‘Fund’’). The shares of the Fund are collectively referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and https://www.nyse.com. 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. 1. Purpose Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by NYSE Arca, Inc. Regarding Listing and Trading of the PIMCO Build America Bond Strategy Fund 1 15 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 9 17 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. The Exchange proposes to list and trade the Shares of the Fund under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange.4 The Fund will be an actively managed exchange traded fund. The Shares will be offered by the Trust, which is a Delaware statutory trust. The 4 The Commission previously approved listing and trading on the Exchange of actively managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR–NYSEArca–2008–31) (order approving Exchange listing and trading of twelve actively-managed funds of the WisdomTree Trust); 60981 (November 10, 2009), 74 FR 59594 (November 18, 2009) (SR–NYSEArca–2009–79) (order approving listing of five fixed income funds of the PIMCO ETF Trust). PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 47045 Trust is registered with the Commission as an investment company.5 Description of the Shares and the Fund Pacific Investment Management Company LLC (‘‘PIMCO’’) is the investment adviser (‘‘Adviser’’) to each Fund.6 State Street Bank & Trust Co. is the custodian and transfer agent for the Fund. The Trust’s Distributor is Allianz Global Investors Distributors LLC (the ‘‘Distributor’’), an indirect subsidiary of Allianz Global Investors of America L.P. (‘‘AGI’’), PIMCO’s parent company. The Distributor is a registered brokerdealer.7 Commentary .06 to Rule 8.600 provides that, if the investment adviser to the Investment Company issuing 5 See Registration Statement on Amendment No. 15 to Form N–1A for the Trust filed with the Securities and Exchange Commission on March 10, 2010 (File Nos. 333–155395 and 811–22250) (the ‘‘Registration Statement’’). The descriptions of the Fund and the Shares contained herein are based on information in the Registration Statement. 6 The Exchange represents that the Adviser, as the investment adviser of the Fund, and its related personnel, are subject to Investment Advisers Act Rule 204A–1. This Rule specifically requires the adoption of a code of ethics by an investment advisor to include, at a minimum: (i) Standards of business conduct that reflect the firm’s/personnel fiduciary obligations; (ii) provisions requiring supervised persons to comply with applicable federal securities laws; (iii) provisions that require all access persons to report, and the firm to review, their personal securities transactions and holdings periodically as specifically set forth in Rule 204A– 1; (iv) provisions requiring supervised persons to report any violations of the code of ethics promptly to the chief compliance officer (‘‘CCO’’) or, provided the CCO also receives reports of all violations, to other persons designated in the code of ethics; and (v) provisions requiring the investment advisor to provide each of the supervised persons with a copy of the code of ethics with an acknowledgement by said supervised persons. In addition, Rule 206(4)– 7 under the Advisers Act makes it unlawful for an investment advisor to provide investment advice to clients unless such investment advisor has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment advisor 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. 7 The Fund has received an order granting certain exemptive relief to the Trust under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’). In compliance with Commentary .04 to NYSE Arca Equities Rule 8.600, which applies to Managed Fund Shares based on an international or global portfolio, the Trust’s application for exemptive relief under the 1940 Act states that the Fund will comply with the federal securities laws in accepting securities for deposits and satisfying redemptions with redemption securities, including that the securities accepted for deposits and the securities used to satisfy redemption requests are sold in transactions that would be exempt from registration under the Securities Act of 1933 (15 U.S.C. 77a). E:\FR\FM\04AUN1.SGM 04AUN1 47046 Federal Register / Vol. 75, No. 149 / Wednesday, August 4, 2010 / Notices mstockstill on DSKH9S0YB1PROD with NOTICES Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a ‘‘fire wall’’ between the investment adviser and the brokerdealer with respect to access to information concerning the composition and/or changes to such Investment Company portfolio.8 In addition, Commentary .06 further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the open-end fund’s portfolio. Commentary .06 to Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the broker-dealer reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds. The Adviser is affiliated with a brokerdealer, Allianz Global Investors Distributors LLC, and has implemented a fire wall with respect to such brokerdealer regarding access to information concerning the composition and/or changes to a portfolio. PIMCO Build America Bond Strategy Fund According to the Registration Statement, the Fund’s investment objective is to seek maximum current income, consistent with preservation of capital. The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in taxable municipal debt securities publicly issued under the Build America Bond program. The Build America Bond program was created as part of the American Recovery and Reinvestment Act of 2009 (the ‘‘2009 Act’’) (‘‘Build America Bonds’’). The Fund invests in U.S. dollar-denominated Fixed Income Instruments that are primarily investment grade, but may invest up to 20% of its total assets in high yield securities (‘‘junk bonds’’) rated B or higher by Moody’s Investors Service, Inc., or equivalently rated by Standard 8 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the investment adviser is 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 nonpublic information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. VerDate Mar<15>2010 16:26 Aug 03, 2010 Jkt 220001 & Poor’s Ratings Services or Fitch, Inc., or, if unrated, determined by PIMCO to be of comparable quality.9 The average portfolio duration of the Fund normally varies within two years (plus or minus) of the duration of The Barclays Capital Build America Bond Index, which as of June 25, 2010, was approximately 12 years. Municipal bonds generally are issued by or on behalf of states and local governments and their agencies, authorities and other instrumentalities. Unlike most municipal bonds, interest received on Build America Bonds is subject to federal and state income tax. The Fund may invest 25% or more of its total assets in bonds that finance similar projects, such as those relating to education, health care, housing, transportation, and utilities. The portfolio manager focuses on bonds with the potential to offer attractive current income, typically looking for bonds that can provide consistently attractive current yields or that are trading at competitive market prices. The Fund may purchase and sell securities on a when-issued, delayed delivery or forward commitment basis. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs). According to the Registration Statement, Build America Bonds are taxable municipal bonds on which the issuer receives U.S. Government support for the interest paid. Pursuant 9 According to the Registration Statement, the Fund may invest in ‘‘Fixed Income Instruments,’’ consistent with the Fund’s objective. Fixed Income Instruments, as used generally in the Registration Statement, include: • securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (‘‘U.S. Government Securities’’); • corporate debt securities of U.S. and non-U.S. issuers, including corporate commercial paper; • mortgage-backed and other asset-backed securities; • inflation-indexed bonds issued both by governments and corporations; • trust preferred securities; • delayed funding loans and revolving credit facilities; • bank certificates of deposit, fixed time deposits and bankers’ acceptances; • repurchase agreements on Fixed Income Instruments and reverse repurchase agreements on Fixed Income Instruments; • debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises; • obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and • obligations of international agencies or supranational entities. PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 to the 2009 Act, issuers of ‘‘direct pay’’ Build America Bonds (i.e., taxable municipal bonds issued to provide funds for qualified capital expenditures) are entitled to receive payments from the U.S. Treasury over the life of the bond equal to 35% (or 45% in the case of Recovery Zone Economic Development Bonds) of the interest paid. For example, if a Build America Bond is issued with a taxable coupon of 10%, the issuer would receive a payment from the U.S. Treasury equaling 3.5% or 4.5% in the case of Recovery Zone Economic Development Bonds. The federal interest subsidy continues for the life of the bonds. Build America Bonds offer an alternative form of financing to state and local governments whose primary means for accessing the capital markets has been through the issuance of tax-free municipal bonds. As of May 2010, approximately $106.5 billion of Build America Bonds have been issued since April 2009.10 Issuance of Build America Bonds will cease on December 31, 2010 unless the relevant provisions of the 2009 Act are extended. In the event that the Build America Bond program is not extended, the Build America Bonds outstanding at such time will continue to be eligible for the federal interest rate subsidy, which continues for the life of the Build America Bonds; however, no bonds issued following expiration of the Build America Bond program will be eligible for the federal tax subsidy. If the Build America Bond program is not extended, the Fund will evaluate the Fund’s investment strategy and make appropriate changes that it believes are in the best interests of the Fund, including changing the Fund’s investment strategy to invest in other taxable municipal securities.11 As noted above, under the 2009 Act, the ability of municipalities to issue Build America Bonds expires on December 31, 2010. According to the Registration Statement, if the Build America Bond program is not extended, 10 See SIFMA Research Quarterly, Q1 2010 which can be found at Securities Industry and Financial Markets Association Web site at https:// www.sifma.org. See also e-mail from Michael Cavalier, Chief Counsel, Exchange, to Ronesha Butler and Kristie Diemer, Special Counsels, Division, Commission, dated July 21, 2010 (‘‘Exchange Email’’). 11 In the event the Build America Bond program is not extended and the Fund determines to change its investment strategy, the Exchange will file a proposed rule change pursuant to Rule 19b–4 under the Act to permit continued listing of the Fund, and the Fund has represented to the Exchange that it will not change its investment strategy until such proposed rule change is approved by the Commission or becomes effective under Section 19(b) of the Act. E:\FR\FM\04AUN1.SGM 04AUN1 Federal Register / Vol. 75, No. 149 / Wednesday, August 4, 2010 / Notices mstockstill on DSKH9S0YB1PROD with NOTICES the number of Build America Bonds available in the market will be limited, which may negatively affect the value of the Build America Bonds. Because Build America Bonds are a relatively new form of municipal financing and are subject to extensions of the 2009 Act or modifications through future legislation, it is possible a market for such bonds will fail to develop or decline in value, causing Build America Bonds to experience greater illiquidity than other municipal obligations. The Fund may enter into repurchase agreements, in which the Fund purchases a security from a bank or broker-dealer, which agrees to repurchase the security at the Fund’s cost plus interest within a specified time. In addition, the Fund may enter into reverse repurchase agreements and dollar rolls; may purchase securities which it is eligible to purchase on a when-issued basis, may purchase and sell such securities for delayed delivery and may make contracts to purchase such securities for a fixed price at a future date beyond normal settlement time (forward commitments); may invest in, to the extent permitted by Section 12(d)(1) of the 1940 Act, other affiliated and unaffiliated funds, such as open-end or closed-end management investment companies, including other exchange traded funds; may invest securities lending collateral in one or more money market funds to the extent permitted by Rule 12d1–1 under the 1940 Act; and may invest up to 15% of its net assets in illiquid securities.12 The Fund will be restricted from investing in derivative instruments such as options contracts, futures contracts, options on futures contracts, and swap agreements (including, but not limited to, credit default swaps and swaps on exchangetraded funds). The Fund will not invest in non-U.S. equity securities. The Shares According to the Registration Statement, Shares of the Fund that trade in the secondary market are ‘‘created’’ at net asset value (‘‘NAV’’) 13 by Authorized 12 According to the Registration Statement, the term ‘‘illiquid securities’’ for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which a Fund has valued the securities. 13 The NAV of the Fund’s shares generally is calculated once daily Monday through Friday as of the close of regular trading on the New York Stock Exchange, generally 4 p.m. Eastern time (the ‘‘NAV Calculation Time’’) on any Business Day as defined in the Registration Statement. NAV per share is calculated by dividing a Fund’s net assets by the number of Fund shares outstanding. For more information regarding the valuation of Fund investments in calculating the Fund’s NAV, see the Registration Statement. VerDate Mar<15>2010 16:26 Aug 03, 2010 Jkt 220001 Participants only in block-size Creation Units of 100,000 shares or multiples thereof. Each Authorized Participant enters into an authorized participant agreement with the Fund’s Distributor. A creation transaction, which is subject to acceptance by the transfer agent, takes place when an Authorized Participant deposits into the Fund a specified amount of cash and/or a portfolio of securities specified by the Fund in exchange for a specified number of Creation Units. Similarly, Shares can be redeemed only in Creation Units, generally in-kind for a portfolio of securities held by a Fund and/or for a specified amount of cash. Except when aggregated in Creation Units, Shares are not redeemable by the Fund. The prices at which creations and redemptions occur are based on the next calculation of NAV after an order is received. Requirements as to the timing and form of orders are described in the authorized participant agreement. PIMCO makes available on each Business Day via the National Securities Clearing Corporation (‘‘NSCC’’) or other method of public dissemination, prior to the opening of business (subject to amendments) on the Exchange (currently 9:30 a.m., Eastern time), the identity and the required amount of each Deposit Security and the amount of the Cash Component to be included in the current Fund Deposit (based on information at the end of the previous Business Day). Creations and redemptions must be made by an Authorized Participant or through a firm that is either a member of the Continuous Net Settlement System of the NSCC or a DTC participant, and in each case, must have executed an agreement with the Distributor with respect to creations and redemptions of Creation Unit aggregations. Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings, disclosure policies, distributions and taxes is included in the Registration Statement. All terms relating to the Fund that are referred to, but not defined in, this proposed rule change are defined in the Registration Statement. Availability of Information The Fund’s Web site (https:// www.pimcoetfs.com), which will be publicly available prior to the public offering of Shares, will include a form of the Prospectus for the Fund that may be downloaded. The Web site will include additional quantitative information updated on a daily basis, PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 47047 including, for the Fund: (1) The prior business day’s reported NAV, mid-point of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/Ask Price’’),14 and a calculation of the premium and discount of the Bid/Ask Price against the NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters (or the life of the Fund, if shorter). On each business day, before commencement of trading in Shares in the Core Trading Session 15 on the Exchange, the Trust will disclose on its Web site the identities and quantities of the portfolio of securities and other assets (the ‘‘Disclosed Portfolio’’) held by the Fund that will form the basis for the Fund’s calculation of NAV at the end of the business day.16 The Web site and information will be publicly available at no charge. In addition, an estimated value, defined in NYSE Arca Equities Rule 8.600 as the ‘‘Portfolio Indicative Value,’’ that reflects an estimated intraday value of the Fund’s portfolio, will be disseminated. The Portfolio Indicative Value will be based upon the current value for the components of the Disclosed Portfolio and will be updated and disseminated by one or more major market data venders at least every 15 seconds during the Core Trading Session on the Exchange. The dissemination of the Portfolio Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of a Fund on a daily basis and to provide a close estimate of that value throughout the trading day. Information regarding market price and volume of the Shares is and will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. The previous day’s closing price and trading volume information 14 The Bid/Ask Price of the Fund is determined using the midpoint of the highest bid and the lowest offer on the Exchange as of the time of calculation of the NAV. The records relating to Bid/ Ask Prices will be retained by the Fund and its service providers. 15 The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern time. 16 Under accounting procedures followed by the Fund, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the current business day (‘‘T+1’’). Notwithstanding the foregoing, portfolio trades that are executed prior to the opening of the Exchange on any business day may be booked and reflected in NAV on such business day. Accordingly, the Fund will be able to disclose at the beginning of the business day the portfolio that will form the basis for the NAV calculation at the end of the business day. E:\FR\FM\04AUN1.SGM 04AUN1 mstockstill on DSKH9S0YB1PROD with NOTICES 47048 Federal Register / Vol. 75, No. 149 / Wednesday, August 4, 2010 / Notices will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares will be available via the Consolidated Tape Association high-speed line. Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), the Fund’s Shareholder Reports, and its Form N–CSR and Form N–SAR, filed twice a year. The Trust’s SAI and Shareholder Reports are available free upon request from the Trust, and those documents and the Form N–CSR and Form N–SAR may be viewed on-screen or downloaded from the Commission’s Web site at https://www.sec.gov. Initial and Continued Listing The Shares will be subject to NYSE Arca Equities Rule 8.600(d), which sets forth the initial and continued listing criteria applicable to Managed Fund Shares. The Exchange represents that, for initial and/or continued listing, the Shares must be in compliance with Rule 10A–3 17 under the Exchange Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. 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 and the Disclosed Portfolio will be made available to all market participants at the same time. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. Shares of the Fund will be halted if the ‘‘circuit breaker’’ parameters in NYSE Arca Equities Rule 7.12 are reached. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities comprising the Disclosed Portfolio 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. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. Trading Rules The Exchange 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. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern time in accordance 17 See 17 CFR 240.10A–3. VerDate Mar<15>2010 16:26 Aug 03, 2010 Jkt 220001 with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001.18 Surveillance The Exchange intends to utilize its existing surveillance procedures applicable to derivative products (which includes Managed Fund Shares) to monitor trading in the Shares. The Exchange 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 applicable federal securities laws. The Exchange’s current trading surveillance focuses on detecting securities trading outside their normal patterns. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. The Exchange may obtain information via the Intermarket Surveillance Group (‘‘ISG’’) from other exchanges who are members of ISG.19 In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Bulletin Prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the 18 See Exchange Email, supra note 10. a list of the current members of ISG, see https://www.isgportal.org. The Exchange notes that not all of the components of the Disclosed Portfolio for the Fund may trade on exchanges that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. 19 For PO 00000 Frm 00150 Fmt 4703 Sfmt 4703 Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated; (4) how information regarding the Portfolio Indicative Value is disseminated; (5) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Bulletin will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Exchange Act. The Bulletin will also disclose that the NAV for the Shares will be calculated as of 4 p.m. Eastern time each trading day. 2. Statutory Basis The basis under the Exchange Act for this proposed rule change is the requirement under Section 6(b)(5) 20 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change will facilitate the listing and trading of additional types of exchangetraded products that will enhance competition among market participants, to the benefit of investors and the marketplace. In addition, the listing and trading criteria set forth in NYSE Arca Equities Rule 8.600 are intended to protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others 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 Within 45 days of the date of publication of this notice in the Federal 20 15 E:\FR\FM\04AUN1.SGM U.S.C. 78f(b)(5). 04AUN1 Federal Register / Vol. 75, No. 149 / Wednesday, August 4, 2010 / Notices Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. 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: mstockstill on DSKH9S0YB1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2010–68 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2010–68. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549–1090 on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing will also be available for inspection and copying at the NYSE’s principal office and on its Internet Web site at https:// www.nyse.com. All comments received will be posted without change; the VerDate Mar<15>2010 16:26 Aug 03, 2010 Jkt 220001 Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2010–68 and should be submitted on or before August 25, 2010. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–19083 Filed 8–3–10; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–62601; File No. SR–NSX– 2010–09] Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Enhanced Customer Disclosure Rules Concerning Transactions Outside of Regular Trading Hours July 29, 2010. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 29, 2010, National Stock Exchange, Inc. (‘‘NSX ®’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change, as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comment on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NSX is proposing to adopt certain enhanced customer disclosure requirements applicable to transactions outside of the Exchange’s regular trading hours trading session. The text of the proposed rule change is available on the Exchange’s Web site at https://www.nsx.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 1 15 PO 00000 Frm 00151 Fmt 4703 Sfmt 4703 47049 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 Exchange 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 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 Statutory Basis for, the Proposed Rule Change 1. Purpose With this rule change, the Exchange is proposing to amend Rule 11.1 to adopt enhanced customer disclosure requirements applicable to transactions on the Exchange during trading sessions outside of Regular Trading Hours (as such term is defined below). In addition, the instant rule change proposes to make certain clean-up conforming changes to other Exchange Rules as further described below. The instant rule filing proposes to adopt as Rule 11.1(c) certain enhanced disclosure requirements applicable to transactions effected on the Exchange outside of the Regular Trading Hours trading session.5 Specifically, Rule 11.1(c) provides that no ETP Holder may accept an order from a non-ETP Holder for execution outside of Regular Trading Hours without disclosing to such non-ETP Holder that extended hours trading involves material trading risks, including the possibility of lower liquidity, high volatility, changing prices, unlinked markets, an exaggerated effect from news announcements, wider spreads and any other relevant risk. The absence of an updated underlying index value or intraday indicative value is an additional trading risk in extended hours for UTP Derivative Security products under NSX Rule 15.9. Proposed Rule 11.1(c) provides for the benefit of ETP Holders disclosure language regarding the foregoing risks that would be generally acceptable to 5 Currently, the Exchange’s Regular Trading Hours, as such term is defined in NSX Rule 1(R)(1), are from 8:30 a.m. until 3 p.m. Central Time (9:30 a.m. until 4 p.m. Eastern Time (‘‘ET’’)). The preRegular Trading Hours trading session is from 8 a.m. until 9:30 a.m. ET, and the post-Regular Trading Hours trading session is from 4 p.m. until 6:30 p.m. ET. E:\FR\FM\04AUN1.SGM 04AUN1

Agencies

[Federal Register Volume 75, Number 149 (Wednesday, August 4, 2010)]
[Notices]
[Pages 47045-47049]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-19083]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62585; File No. SR-NYSEArca-2010-68]


 Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by NYSE Arca, Inc. Regarding Listing and Trading of the PIMCO 
Build America Bond Strategy Fund

July 28, 2010.
    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 July 14, 2010, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
fund of the PIMCO ETF Trust (the ``Trust'') under NYSE Arca Equities 
Rule 8.600 (Managed Fund Shares): PIMCO Build America Bond Strategy 
Fund (the ``Fund''). The shares of the Fund are collectively referred 
to herein as the ``Shares.''
    The text of the proposed rule change is available at the Exchange, 
the Commission's Public Reference Room, and https://www.nyse.com.

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund 
under NYSE Arca Equities Rule 8.600, which governs the listing and 
trading of Managed Fund Shares on the Exchange.\4\ The Fund will be an 
actively managed exchange traded fund. The Shares will be offered by 
the Trust, which is a Delaware statutory trust. The Trust is registered 
with the Commission as an investment company.\5\
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    \4\ The Commission previously approved listing and trading on 
the Exchange of actively managed funds under Rule 8.600. See, e.g., 
Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 
27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order approving Exchange 
listing and trading of twelve actively-managed funds of the 
WisdomTree Trust); 60981 (November 10, 2009), 74 FR 59594 (November 
18, 2009) (SR-NYSEArca-2009-79) (order approving listing of five 
fixed income funds of the PIMCO ETF Trust).
    \5\ See Registration Statement on Amendment No. 15 to Form N-1A 
for the Trust filed with the Securities and Exchange Commission on 
March 10, 2010 (File Nos. 333-155395 and 811-22250) (the 
``Registration Statement''). The descriptions of the Fund and the 
Shares contained herein are based on information in the Registration 
Statement.
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Description of the Shares and the Fund
    Pacific Investment Management Company LLC (``PIMCO'') is the 
investment adviser (``Adviser'') to each Fund.\6\ State Street Bank & 
Trust Co. is the custodian and transfer agent for the Fund. The Trust's 
Distributor is Allianz Global Investors Distributors LLC (the 
``Distributor''), an indirect subsidiary of Allianz Global Investors of 
America L.P. (``AGI''), PIMCO's parent company. The Distributor is a 
registered broker-dealer.\7\
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    \6\ The Exchange represents that the Adviser, as the investment 
adviser of the Fund, and its related personnel, are subject to 
Investment Advisers Act Rule 204A-1. This Rule specifically requires 
the adoption of a code of ethics by an investment advisor to 
include, at a minimum: (i) Standards of business conduct that 
reflect the firm's/personnel fiduciary obligations; (ii) provisions 
requiring supervised persons to comply with applicable federal 
securities laws; (iii) provisions that require all access persons to 
report, and the firm to review, their personal securities 
transactions and holdings periodically as specifically set forth in 
Rule 204A-1; (iv) provisions requiring supervised persons to report 
any violations of the code of ethics promptly to the chief 
compliance officer (``CCO'') or, provided the CCO also receives 
reports of all violations, to other persons designated in the code 
of ethics; and (v) provisions requiring the investment advisor to 
provide each of the supervised persons with a copy of the code of 
ethics with an acknowledgement by said supervised persons. In 
addition, Rule 206(4)-7 under the Advisers Act makes it unlawful for 
an investment advisor to provide investment advice to clients unless 
such investment advisor has (i) adopted and implemented written 
policies and procedures reasonably designed to prevent violation, by 
the investment advisor 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.
    \7\ The Fund has received an order granting certain exemptive 
relief to the Trust under the Investment Company Act of 1940 (15 
U.S.C. 80a-1) (``1940 Act''). In compliance with Commentary .04 to 
NYSE Arca Equities Rule 8.600, which applies to Managed Fund Shares 
based on an international or global portfolio, the Trust's 
application for exemptive relief under the 1940 Act states that the 
Fund will comply with the federal securities laws in accepting 
securities for deposits and satisfying redemptions with redemption 
securities, including that the securities accepted for deposits and 
the securities used to satisfy redemption requests are sold in 
transactions that would be exempt from registration under the 
Securities Act of 1933 (15 U.S.C. 77a).
---------------------------------------------------------------------------

    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the Investment Company issuing

[[Page 47046]]

Managed Fund Shares is affiliated with a broker-dealer, such investment 
adviser shall erect a ``fire wall'' between the investment adviser and 
the broker-dealer with respect to access to information concerning the 
composition and/or changes to such Investment Company portfolio.\8\ In 
addition, Commentary .06 further requires that personnel who make 
decisions on the open-end fund's portfolio composition must be subject 
to procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the open-end fund's portfolio. 
Commentary .06 to Rule 8.600 is similar to Commentary .03(a)(i) and 
(iii) to NYSE Arca Equities Rule 5.2(j)(3); however, Commentary .06 in 
connection with the establishment of a ``fire wall'' between the 
investment adviser and the broker-dealer reflects the applicable open-
end fund's portfolio, not an underlying benchmark index, as is the case 
with index-based funds. The Adviser is affiliated with a broker-dealer, 
Allianz Global Investors Distributors LLC, and has implemented a fire 
wall with respect to such broker-dealer regarding access to information 
concerning the composition and/or changes to a portfolio.
---------------------------------------------------------------------------

    \8\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the investment adviser is 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.
---------------------------------------------------------------------------

    PIMCO Build America Bond Strategy Fund
    According to the Registration Statement, the Fund's investment 
objective is to seek maximum current income, consistent with 
preservation of capital. The Fund seeks to achieve its investment 
objective by investing under normal circumstances at least 80% of its 
assets in taxable municipal debt securities publicly issued under the 
Build America Bond program. The Build America Bond program was created 
as part of the American Recovery and Reinvestment Act of 2009 (the 
``2009 Act'') (``Build America Bonds''). The Fund invests in U.S. 
dollar-denominated Fixed Income Instruments that are primarily 
investment grade, but may invest up to 20% of its total assets in high 
yield securities (``junk bonds'') rated B or higher by Moody's 
Investors Service, Inc., or equivalently rated by Standard & Poor's 
Ratings Services or Fitch, Inc., or, if unrated, determined by PIMCO to 
be of comparable quality.\9\
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    \9\ According to the Registration Statement, the Fund may invest 
in ``Fixed Income Instruments,'' consistent with the Fund's 
objective. Fixed Income Instruments, as used generally in the 
Registration Statement, include:
     securities issued or guaranteed by the U.S. Government, 
its agencies or government-sponsored enterprises (``U.S. Government 
Securities'');
     corporate debt securities of U.S. and non-U.S. issuers, 
including corporate commercial paper;
     mortgage-backed and other asset-backed securities;
     inflation-indexed bonds issued both by governments and 
corporations;
     trust preferred securities;
     delayed funding loans and revolving credit facilities;
     bank certificates of deposit, fixed time deposits and 
bankers' acceptances;
     repurchase agreements on Fixed Income Instruments and 
reverse repurchase agreements on Fixed Income Instruments;
     debt securities issued by states or local governments 
and their agencies, authorities and other government-sponsored 
enterprises;
     obligations of non-U.S. governments or their 
subdivisions, agencies and government-sponsored enterprises; and
     obligations of international agencies or supranational 
entities.
---------------------------------------------------------------------------

    The average portfolio duration of the Fund normally varies within 
two years (plus or minus) of the duration of The Barclays Capital Build 
America Bond Index, which as of June 25, 2010, was approximately 12 
years.
    Municipal bonds generally are issued by or on behalf of states and 
local governments and their agencies, authorities and other 
instrumentalities. Unlike most municipal bonds, interest received on 
Build America Bonds is subject to federal and state income tax. The 
Fund may invest 25% or more of its total assets in bonds that finance 
similar projects, such as those relating to education, health care, 
housing, transportation, and utilities. The portfolio manager focuses 
on bonds with the potential to offer attractive current income, 
typically looking for bonds that can provide consistently attractive 
current yields or that are trading at competitive market prices. The 
Fund may purchase and sell securities on a when-issued, delayed 
delivery or forward commitment basis. The Fund may, without limitation, 
seek to obtain market exposure to the securities in which it primarily 
invests by entering into a series of purchase and sale contracts or by 
using other investment techniques (such as buy backs).
    According to the Registration Statement, Build America Bonds are 
taxable municipal bonds on which the issuer receives U.S. Government 
support for the interest paid. Pursuant to the 2009 Act, issuers of 
``direct pay'' Build America Bonds (i.e., taxable municipal bonds 
issued to provide funds for qualified capital expenditures) are 
entitled to receive payments from the U.S. Treasury over the life of 
the bond equal to 35% (or 45% in the case of Recovery Zone Economic 
Development Bonds) of the interest paid. For example, if a Build 
America Bond is issued with a taxable coupon of 10%, the issuer would 
receive a payment from the U.S. Treasury equaling 3.5% or 4.5% in the 
case of Recovery Zone Economic Development Bonds. The federal interest 
subsidy continues for the life of the bonds. Build America Bonds offer 
an alternative form of financing to state and local governments whose 
primary means for accessing the capital markets has been through the 
issuance of tax-free municipal bonds. As of May 2010, approximately 
$106.5 billion of Build America Bonds have been issued since April 
2009.\10\
---------------------------------------------------------------------------

    \10\ See SIFMA Research Quarterly, Q1 2010 which can be found at 
Securities Industry and Financial Markets Association Web site at 
https://www.sifma.org. See also e-mail from Michael Cavalier, Chief 
Counsel, Exchange, to Ronesha Butler and Kristie Diemer, Special 
Counsels, Division, Commission, dated July 21, 2010 (``Exchange 
Email'').
---------------------------------------------------------------------------

    Issuance of Build America Bonds will cease on December 31, 2010 
unless the relevant provisions of the 2009 Act are extended. In the 
event that the Build America Bond program is not extended, the Build 
America Bonds outstanding at such time will continue to be eligible for 
the federal interest rate subsidy, which continues for the life of the 
Build America Bonds; however, no bonds issued following expiration of 
the Build America Bond program will be eligible for the federal tax 
subsidy. If the Build America Bond program is not extended, the Fund 
will evaluate the Fund's investment strategy and make appropriate 
changes that it believes are in the best interests of the Fund, 
including changing the Fund's investment strategy to invest in other 
taxable municipal securities.\11\
---------------------------------------------------------------------------

    \11\ In the event the Build America Bond program is not extended 
and the Fund determines to change its investment strategy, the 
Exchange will file a proposed rule change pursuant to Rule 19b-4 
under the Act to permit continued listing of the Fund, and the Fund 
has represented to the Exchange that it will not change its 
investment strategy until such proposed rule change is approved by 
the Commission or becomes effective under Section 19(b) of the Act.
---------------------------------------------------------------------------

    As noted above, under the 2009 Act, the ability of municipalities 
to issue Build America Bonds expires on December 31, 2010. According to 
the Registration Statement, if the Build America Bond program is not 
extended,

[[Page 47047]]

the number of Build America Bonds available in the market will be 
limited, which may negatively affect the value of the Build America 
Bonds. Because Build America Bonds are a relatively new form of 
municipal financing and are subject to extensions of the 2009 Act or 
modifications through future legislation, it is possible a market for 
such bonds will fail to develop or decline in value, causing Build 
America Bonds to experience greater illiquidity than other municipal 
obligations.
    The Fund may enter into repurchase agreements, in which the Fund 
purchases a security from a bank or broker-dealer, which agrees to 
repurchase the security at the Fund's cost plus interest within a 
specified time. In addition, the Fund may enter into reverse repurchase 
agreements and dollar rolls; may purchase securities which it is 
eligible to purchase on a when-issued basis, may purchase and sell such 
securities for delayed delivery and may make contracts to purchase such 
securities for a fixed price at a future date beyond normal settlement 
time (forward commitments); may invest in, to the extent permitted by 
Section 12(d)(1) of the 1940 Act, other affiliated and unaffiliated 
funds, such as open-end or closed-end management investment companies, 
including other exchange traded funds; may invest securities lending 
collateral in one or more money market funds to the extent permitted by 
Rule 12d1-1 under the 1940 Act; and may invest up to 15% of its net 
assets in illiquid securities.\12\ The Fund will be restricted from 
investing in derivative instruments such as options contracts, futures 
contracts, options on futures contracts, and swap agreements 
(including, but not limited to, credit default swaps and swaps on 
exchange-traded funds).
---------------------------------------------------------------------------

    \12\ According to the Registration Statement, the term 
``illiquid securities'' for this purpose means securities that 
cannot be disposed of within seven days in the ordinary course of 
business at approximately the amount at which a Fund has valued the 
securities.
---------------------------------------------------------------------------

    The Fund will not invest in non-U.S. equity securities.
    The Shares
    According to the Registration Statement, Shares of the Fund that 
trade in the secondary market are ``created'' at net asset value 
(``NAV'') \13\ by Authorized Participants only in block-size Creation 
Units of 100,000 shares or multiples thereof. Each Authorized 
Participant enters into an authorized participant agreement with the 
Fund's Distributor. A creation transaction, which is subject to 
acceptance by the transfer agent, takes place when an Authorized 
Participant deposits into the Fund a specified amount of cash and/or a 
portfolio of securities specified by the Fund in exchange for a 
specified number of Creation Units.
---------------------------------------------------------------------------

    \13\ The NAV of the Fund's shares generally is calculated once 
daily Monday through Friday as of the close of regular trading on 
the New York Stock Exchange, generally 4 p.m. Eastern time (the 
``NAV Calculation Time'') on any Business Day as defined in the 
Registration Statement. NAV per share is calculated by dividing a 
Fund's net assets by the number of Fund shares outstanding. For more 
information regarding the valuation of Fund investments in 
calculating the Fund's NAV, see the Registration Statement.
---------------------------------------------------------------------------

    Similarly, Shares can be redeemed only in Creation Units, generally 
in-kind for a portfolio of securities held by a Fund and/or for a 
specified amount of cash. Except when aggregated in Creation Units, 
Shares are not redeemable by the Fund. The prices at which creations 
and redemptions occur are based on the next calculation of NAV after an 
order is received. Requirements as to the timing and form of orders are 
described in the authorized participant agreement.
    PIMCO makes available on each Business Day via the National 
Securities Clearing Corporation (``NSCC'') or other method of public 
dissemination, prior to the opening of business (subject to amendments) 
on the Exchange (currently 9:30 a.m., Eastern time), the identity and 
the required amount of each Deposit Security and the amount of the Cash 
Component to be included in the current Fund Deposit (based on 
information at the end of the previous Business Day).
    Creations and redemptions must be made by an Authorized Participant 
or through a firm that is either a member of the Continuous Net 
Settlement System of the NSCC or a DTC participant, and in each case, 
must have executed an agreement with the Distributor with respect to 
creations and redemptions of Creation Unit aggregations.
    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings, disclosure policies, 
distributions and taxes is included in the Registration Statement. All 
terms relating to the Fund that are referred to, but not defined in, 
this proposed rule change are defined in the Registration Statement.
    Availability of Information
    The Fund's Web site (https://www.pimcoetfs.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the Prospectus for the Fund that may be downloaded. The Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund: (1) The prior business day's 
reported NAV, mid-point of the bid/ask spread at the time of 
calculation of such NAV (the ``Bid/Ask Price''),\14\ and a calculation 
of the premium and discount of the Bid/Ask Price against the NAV; and 
(2) data in chart format displaying the frequency distribution of 
discounts and premiums of the daily Bid/Ask Price against the NAV, 
within appropriate ranges, for each of the four previous calendar 
quarters (or the life of the Fund, if shorter). On each business day, 
before commencement of trading in Shares in the Core Trading Session 
\15\ on the Exchange, the Trust will disclose on its Web site the 
identities and quantities of the portfolio of securities and other 
assets (the ``Disclosed Portfolio'') held by the Fund that will form 
the basis for the Fund's calculation of NAV at the end of the business 
day.\16\ The Web site and information will be publicly available at no 
charge.
---------------------------------------------------------------------------

    \14\ The Bid/Ask Price of the Fund is determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the NAV. The records relating to Bid/
Ask Prices will be retained by the Fund and its service providers.
    \15\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern 
time.
    \16\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Notwithstanding the 
foregoing, portfolio trades that are executed prior to the opening 
of the Exchange on any business day may be booked and reflected in 
NAV on such business day. Accordingly, the Fund will be able to 
disclose at the beginning of the business day the portfolio that 
will form the basis for the NAV calculation at the end of the 
business day.
---------------------------------------------------------------------------

    In addition, an estimated value, defined in NYSE Arca Equities Rule 
8.600 as the ``Portfolio Indicative Value,'' that reflects an estimated 
intraday value of the Fund's portfolio, will be disseminated. The 
Portfolio Indicative Value will be based upon the current value for the 
components of the Disclosed Portfolio and will be updated and 
disseminated by one or more major market data venders at least every 15 
seconds during the Core Trading Session on the Exchange. The 
dissemination of the Portfolio Indicative Value, together with the 
Disclosed Portfolio, will allow investors to determine the value of the 
underlying portfolio of a Fund on a daily basis and to provide a close 
estimate of that value throughout the trading day.
    Information regarding market price and volume of the Shares is and 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. The 
previous day's closing price and trading volume information

[[Page 47048]]

will be published daily in the financial section of newspapers. 
Quotation and last sale information for the Shares will be available 
via the Consolidated Tape Association high-speed line.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at https://www.sec.gov.
    Initial and Continued Listing
    The Shares will be subject to NYSE Arca Equities Rule 8.600(d), 
which sets forth the initial and continued listing criteria applicable 
to Managed Fund Shares. The Exchange represents that, for initial and/
or continued listing, the Shares must be in compliance with Rule 10A-3 
\17\ under the Exchange Act, as provided by NYSE Arca Equities Rule 
5.3. A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange. 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 and the Disclosed Portfolio 
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \17\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Shares of the Fund will be halted if 
the ``circuit breaker'' parameters in NYSE Arca Equities Rule 7.12 are 
reached. Trading may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities comprising the Disclosed Portfolio 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. Trading in the Shares will be subject 
to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted.
    Trading Rules
    The Exchange 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. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.\18\
---------------------------------------------------------------------------

    \18\ See Exchange Email, supra note 10.
---------------------------------------------------------------------------

    Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which includes Managed 
Fund Shares) to monitor trading in the Shares. The Exchange 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 applicable federal securities laws.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members of 
ISG.\19\
---------------------------------------------------------------------------

    \19\ For a list of the current members of ISG, see https://www.isgportal.org. The Exchange notes that not all of the components 
of the Disclosed Portfolio for the Fund may trade on exchanges that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading the Shares; (3) the risks involved in trading 
the Shares during the Opening and Late Trading Sessions when an updated 
Portfolio Indicative Value will not be calculated or publicly 
disseminated; (4) how information regarding the Portfolio Indicative 
Value is disseminated; (5) the requirement that ETP Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated as of 4 p.m. Eastern time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \20\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest. The 
Exchange believes that the proposed rule change will facilitate the 
listing and trading of additional types of exchange-traded products 
that will enhance competition among market participants, to the benefit 
of investors and the marketplace. In addition, the listing and trading 
criteria set forth in NYSE Arca Equities Rule 8.600 are intended to 
protect investors and the public interest.
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    \20\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    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

    Within 45 days of the date of publication of this notice in the 
Federal

[[Page 47049]]

Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2010-68 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2010-68. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (https://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 Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549-1090 on official business days 
between the hours of 10 a.m. and 3 p.m. Copies of the filing will also 
be available for inspection and copying at the NYSE's principal office 
and on its Internet Web site at https://www.nyse.com. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2010-68 and should 
be submitted on or before August 25, 2010.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19083 Filed 8-3-10; 8:45 am]
BILLING CODE 8010-01-P
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