Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the WisdomTree Asia Bond Fund, 194-199 [2010-32943]
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194
Federal Register / Vol. 76, No. 1 / Monday, January 3, 2011 / Notices
POSTAL REGULATORY COMMISSION
[Docket Nos. MC2011–15 and CP2011–51;
Order No. 616]
New Postal Product
Postal Regulatory Commission.
Notice.
AGENCY:
ACTION:
SUMMARY: The Commission is noticing a
recently-filed Postal Service request to
add Priority Mail—Non-published Rates
to the competitive product list. This
notice addresses procedural steps
associated with this filing.
DATES: Comments are due: January 11,
2011. Reply comments are due: January
18, 2011.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://www.prc.
gov. Commenters who cannot submit
their views electronically should
contact the person identified in FOR
FURTHER INFORMATION CONTACT by
telephone for advice on alternatives to
electronic filing.
FOR FURTHER INFORMATION CONTACT:
Stephen L. Sharfman, General Counsel,
stephen.sharfman@prc.gov or 202–789–
6820.
SUPPLEMENTARY INFORMATION:
I. Introduction
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On December 17, 2010, the Postal
Service requested that the Commission
add Priority Mail—Non-published Rates
to the competitive product list within
the Mail Classification Schedule
(MCS).1 This product is modeled after
the Global Expedited Package
Services—Non-published Rates product
that the Commission approved in Order
No. 593.2
Request. In support of its Request, the
Postal Service filed four attachments as
follows:
• Attachment 1—a redacted copy of
Governors’ Decision No. 10–6 and
attachments thereto, including MCS
language describing Priority Mail—Nonpublished Rates, pricing and
methodology, management analysis, and
certification that the prices and
methodology satisfy applicable criteria;
• Attachment 2—a model contract
between the Postal Service and a
customer of Priority Mail—Nonpublished Rates;
1 Request
of the United States Postal Service
Concerning Priority Mail—Non-Published Rates
and Notice of Filing Materials Under Seal,
December 17, 2010 (Request).
2 Docket Nos. MC2010–29 and CP2010–72, Order
Approving Postal Service Request to Add Global
Expedited Package Services—Non-Published Rates
1 to the Competitive Product List, November 22,
2010 (Order No. 593).
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15:48 Dec 30, 2010
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• Attachment 3—a Statement of
Supporting Justification as required by
39 CFR 3020.32; and
• Attachment 4—an application for
non-public treatment of materials to
maintain redacted portions of the
Governors’ Decision, with attachments,
and supporting documents under seal.
Comments. Interested persons may
submit comments on or before January
11, 2011. Reply comments may be
submitted no later than January 18,
2011.
Public Representative. Pursuant to 39
U.S.C. 505, the Commission hereby
appoints Derrick D. Dennis to serve as
officer of the Commission (Public
Representative) to represent the
interests of the general public in this
proceeding. Neither Derrick D. Dennis
nor any staff assigned to assist him shall
participate in or provide any advice on
any Commission decision in this
proceeding other than in their
designated capacity.
It is ordered:
1. The Commission establishes Docket
Nos. MC2011–15 and CP2011–51 to
consider matters raised in the Postal
Service’s December 17, 2010 Request.
2. Comments are due January 11,
2011. Reply comments are due January
18, 2011.
3. Pursuant to 39 U.S.C. 505, the
Commission appoints Derrick D. Dennis
to represent the interests of the general
public in this proceeding.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2010–32974 Filed 12–30–10; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63609; File No. SR–
NYSEArca–2010–116]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Relating to the Listing
and Trading of the WisdomTree Asia
Bond Fund
December 27, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that,
on December 13, 2010, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00114
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the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
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 WisdomTree Trust (‘‘Trust’’) under
NYSE Arca Equities Rule 8.600
(‘‘Managed Fund Shares’’): WisdomTree
Asia Bond Fund (‘‘Fund’’). The shares of
the Fund are collectively referred to
herein as the ‘‘Shares.’’ 3 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares of the WisdomTree
Asia Bond 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
3 See Form 19b–4 Information of the proposed
rule change at 3.
4 The Commission approved NYSE Arca Equities
Rule 8.600 and the listing and trading of certain
funds of the PowerShares Actively Managed Funds
Trust on the Exchange pursuant to Rule 8.600 in
Securities Exchange Act Release No. 57619 (April
4, 2008), 73 FR 19544 (April 10, 2008) (SR–
NYSEArca–2008–25). The Commission also
previously approved listing and trading on the
Exchange of a number 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);
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Federal Register / Vol. 76, No. 1 / Monday, January 3, 2011 / Notices
be an actively managed exchange-traded
fund. The Shares will be offered by the
Trust, which was established as a
Delaware statutory trust on December
15, 2005. The Trust is registered with
the Commission as an investment
company and the Fund has filed a
registration statement on Form N–1A
(‘‘Registration Statement’’) with the
Commission.5
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Description of the Shares and the Fund
WisdomTree Asset Management, Inc.
(‘‘WisdomTree Asset Management’’) is
the investment adviser (‘‘Adviser’’) to
the Fund.6 WisdomTree Asset
Management is not affiliated with any
broker-dealer. Mellon Capital
Management serves as sub-adviser for
the Fund (‘‘Sub-Adviser’’).7 The Bank of
New York Mellon is the administrator,
custodian and transfer agent for the
Trust. ALPS Distributors, Inc. serves as
the distributor for the Trust.8
Commentary .06 to Rule 8.600
provides that, if the investment adviser
to the Investment Company issuing
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
58564 (September 17, 2008), 73 FR 55194
(September 24, 2008) (SR–NYSEArca–2008–86)
(order approving Exchange listing and trading of
WisdomTree Dreyfus Emerging Markets Fund);
62604 (July 30, 2010), 75 FR 47323 (August 5, 2010)
(SR–NYSEArca–2010–49) (order approving listing
and trading of WisdomTree Emerging Markets Local
Debt Fund); 62623 (August 2, 2010), 75 FR 47652
(August 6, 2010) (SR–NYSEArca–2010–51) (order
approving listing and trading of WisdomTree
Dreyfus Commodity Currency Fund).
5 See Post-Effective Amendment No. 41 to
Registration Statement on Form N–1A for the Trust,
dated October 19, 2010 (File Nos. 333–132380 and
811–21864). The descriptions of the Fund and the
Shares contained herein are based on information
in the Registration Statement.
6 WisdomTree Investments, Inc. (‘‘WisdomTree
Investments’’) is the parent company of
WisdomTree Asset Management.
7 The Sub-Adviser is responsible for day-to-day
management of the Fund and, as such, typically
makes all decisions with respect to portfolio
holdings. The Adviser has ongoing oversight
responsibility.
8 The Commission has issued an order granting
certain exemptive relief to the Trust under the
Investment Company Act of 1940 (15 U.S.C. 80a–
1) (‘‘1940 Act’’). See Investment Company Act
Release No. 28171 (October 27, 2008) (File No. 812–
13458). In compliance with Commentary .05 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).
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and/or changes to such Investment
Company portfolio.9 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 SubAdviser is affiliated with multiple
broker-dealers and has implemented a
‘‘fire wall’’ with respect to such brokerdealers regarding access to information
concerning the composition and/or
changes to the Fund’s portfolio.10 In
addition, Sub-Adviser personnel who
9 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 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 nonpublic information by an investment adviser must
be consistent with Rule 204A–1 under the Advisers
Act.
10 The Exchange represents that the Adviser and
Sub-Adviser, and their 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 adviser 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 adviser 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 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.
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195
make decisions regarding the Fund’s
portfolio are subject to procedures
designed to prevent the use and
dissemination of material nonpublic
information regarding the Fund’s
portfolio. In the event (a) the Adviser or
the Sub-Adviser becomes newly
affiliated with a broker-dealer, or (b) any
new adviser or sub-adviser becomes
affiliated with a broker-dealer, they will
be required to implement a fire wall
with respect to such broker-dealer
regarding access to information
concerning the composition and/or
changes to the portfolio.
WisdomTree Asia Bond Fund
According to the Registration
Statement, the Fund seeks to provide
investors with a high level of total
return consisting of both income and
capital appreciation. The Fund is an
actively managed exchange-traded fund
(‘‘ETF’’). The Fund is designed to
provide exposure to a broad range of
Asian government and corporate bonds
through investment in both local
currency (e.g., Hong Kong dollar; South
Korean won) and U.S. dollardenominated Fixed Income Securities.
For purposes of this proposed rule
change, Fixed Income Securities include
bonds, notes or other debt obligations,
such as government or corporate bonds,
denominated in local currencies or U.S.
dollars, as well as issues denominated
in Asian local currencies that are issued
by ‘‘supranational issuers,’’ such as the
European Investment Bank,
International Bank for Reconstruction
and Development, and the International
Finance Corporation, as well as
development agencies supported by
other national governments. The Fund
may also invest in Money Market
Securities and derivative instruments,
as described below.
The Fund seeks to achieve its
investment objective through direct and
indirect investments in Fixed Income
Securities issued by governments and
corporations in Asian countries. The
Fund intends to focus on the
developing/emerging market economies
in Asia, primarily China, Hong Kong,
India, Indonesia, South Korea, Malaysia,
the Philippines, Singapore, Taiwan and
Thailand. While the Fund is permitted
to invest in developed market
economies, this is not a focus of the
Fund. Therefore, although the Fund is
permitted to do so, the Fund is unlikely
to invest in issuers in Japan, Australia,
or New Zealand.
The Fund is designed to provide
broad exposure to Asian government
and corporate bonds and will invest in
a range of instruments with varying
credit risk and duration. The Fund
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intends to invest in both bonds and debt
instruments issued by the governments
of Asia and their agencies and
instrumentalities and as well in bonds
and other debt instruments issued by
corporations organized in Asian
countries. The Fund also may invest in
Fixed Income Securities denominated in
Asian local currencies that are issued by
supranational issuers, as described
above. The Fund also may invest in
inflation-linked Fixed Income Securities
denominated in Asian local currencies.
The Fund intends to invest at least
70% of its net assets in Fixed Income
Securities.11 The Fund expects to invest
up to 20% of its net assets in Asian
corporate bonds. The Fund will invest
only in corporate bonds that the Adviser
or Sub-Adviser deems to be sufficiently
liquid. Generally, a corporate bond must
have $200 million or more par amount
outstanding and significant par value
traded to be considered as an eligible
investment.12 Economic and other
11 The category of ‘‘Asian debt’’ includes both U.S.
dollar-denominated debt and non-U.S. or ‘‘local’’
currency debt. According to the Emerging Markets
Traders Association, the global dollar amount of
emerging market debt instruments traded in 2009
was $4.445 trillion, of which Asian emerging
market (i.e., excluding Japan) debt represented
$1.609 trillion. Asian sovereign debt issued by
major emerging market countries in 2009 included:
(1) China, $175 billion; (2) Hong Kong, $590 billion;
(3) India, $164 billion; (4) Indonesia, $63 billion; (5)
Malaysia, $119 billion; (6) Philippines, $61 billion;
(7) Singapore, $166 billion; (8) South Korea, $172
billion; (9) Taiwan, $27 billion; and (10) Thailand,
$43 billion. Local market instruments traded among
major Asian emerging markets in 2009 included: (1)
Hong Kong, $557 billion; (2) India, $148 billion; (3)
China, $147 billion; (4) Singapore, $146 billion; and
(5) South Korea, $93 billion. (Source: Emerging
Markets Traders Association, 2009 Annual Debt
Trading Volume Survey, March 8, 2010. Additional
information relating to emerging market corporate
bonds is available at: https://www.emta.org.) Local
currency bond issuance in emerging East Asian
markets (comprising China, Hong Kong, Taiwan,
Indonesia, South Korea, Malaysia, Philippines,
Singapore, Thailand and Viet Nam) grew by 18.8%
through June 2010. (Source: Asian Development
Bank, Asia’s Local Bond Markets Expand 18.8%,
Foreign Investment Soars (October 4, 2010),
https://www.adb.org.)
The Adviser represents that Asian sovereign debt
is typically issued in large par size and tends to be
very liquid. Local currency-denominated Asian
debt issued by supranational entities is also actively
traded. Intra-day, executable price quotations on
such instruments are available from major brokerdealer firms. Intra-day price information is available
through subscription services, such as Bloomberg
and Thomson Reuters, which can be accessed by
Authorized Participants and other investors.
12 The Adviser represents that the size and
liquidity of the market for emerging market bonds,
including Asian corporate bonds, generally has
been increasing in recent years. The aggregate dollar
amount of emerging market corporate bonds traded
in 2009 was $514 billion, representing a 32%
increase over the $380 billion traded in 2008.
Turnover in emerging market corporate debt
accounted for 12% of the overall volume of
emerging market debt of $4.445 trillion in 2009, an
increase over the 9% share in 2008. (Source:
Emerging Markets Traders Association Press
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conditions in Asia may, from time to
time, lead to a decrease in the average
par amount outstanding of bond
issuances. Therefore, although the Fund
does not intend to do so, the Fund may
invest up to 5% of its net assets in
corporate bonds with less than $200
million par amount outstanding if (i) the
Adviser or Sub-Adviser deems such
security to be sufficiently liquid based
on its analysis of the market for such
security (based on, for example, brokerdealer quotations or its analysis of the
trading history of the security or the
trading history of other securities issued
by the issuer), (ii) such investment is
consistent with the Fund’s goal of
providing exposure to a broad range of
Asian government and corporate bonds,
and (iii) such investment is deemed by
the Adviser or Sub-Adviser to be in the
best interest of the Fund.
According to the Registration
Statement, the Fund typically will
maintain aggregate portfolio duration of
between 2 and 8 years. Aggregate
portfolio duration is a measure of the
portfolio’s sensitivity to changes in the
level of interest rates. The Fund’s actual
portfolio duration may be longer or
shorter depending upon market
conditions.
The universe of Asian Fixed Income
Securities includes securities that are
rated ‘‘investment grade’’ as well as
‘‘non-investment grade’’ securities. The
Fund is designed to provide a broadbased, representative exposure to Asian
government and corporate bonds and
therefore will invest in both investment
grade and non-investment grade
securities in a manner designed to
provide this exposure. The Fund
expects that it will have 75% or more
of its assets invested in investment
grade securities, and no more than 25%
of its assets invested in non-investment
grade securities. Because the Fund is
designed to provide exposure to a broad
range of Asian government and
corporate bonds, and because the debt
Release, March 8, 2010.) Additional information
relating to emerging market corporate bonds is
available at: https://www.emta.org. Annual growth in
the emerging East Asian corporate bond markets
(comprising China, Hong Kong, Taiwan, Indonesia,
South Korea, Malaysia, Philippines, Singapore,
Thailand and Viet Nam) increased by 24.4%
through June 2010. China’s local currency corporate
bond market grew by 52.7% over that period.
(Source: Asian Development Bank, Asia’s Local
Bond Markets Expand 18.8%, Foreign Investment
Soars (October 4, 2010), https://www.adb.org.)
Corporate bonds outstanding in representative
emerging East Asian markets as of June 2010,
included: (1) China, $546 billion; (2) Hong Kong,
$73 billion; (3) Indonesia, $10 billion; (4) South
Korea, $571 billion; (5) Malaysia, $91 billion; (6)
Philippines, $8 billion; (7) Singapore, $70 billion;
(8) Thailand, $38 billion; and (9) Viet Nam, $2
billion (Source: Asian Development Bank, Asia
Bond Monitor (October 2010), https://www.adb.org.)
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ratings of the Asian governments and
those corporate issuers will change from
time to time, the exact percentage of the
Fund’s investments in investment grade
and non-investment grade securities
will change from time to time in
response to economic events and
changes to the credit ratings of the
Asian government and corporate
issuers.13 Within the non-investment
grade category, some issuers and
instruments are considered to be of
lower credit quality and at higher risk
of default. In order to limit its exposure
to these more speculative credits, the
Fund will not invest more than 15% of
its assets in securities rated B or below
by Moody’s, or equivalently rated by
S&P or Fitch. The Fund does not intend
to invest in unrated securities. However,
it may do so to a limited extent, such
as where a rated security becomes
unrated, if such security is, determined
by the Adviser and Sub-Adviser to be of
comparable quality. In determining
whether a security is of ‘‘comparable
quality,’’ the Adviser and Sub-Adviser
will consider, for example, whether the
issuer of the security has issued other
rated securities.
The Fund will hold Fixed Income
Securities of at least 13 non-affiliated
issuers. The Fund will not concentrate
25% or more of the value of its total
assets (taken at market value at the time
of each investment) in any one industry,
as that term is used in the 1940 Act
(except that this restriction does not
apply to obligations issued by the U.S.
government, or any non-U.S.
government, or their respective agencies
and instrumentalities or governmentsponsored enterprises).
The Fund intends to qualify each year
as a regulated investment company
(‘‘RIC’’) under Subchapter M of the
Internal Revenue Code of 1986, as
amended. The Fund will invest its
assets, and otherwise conduct its
operations, in a manner that is intended
to satisfy the qualifying income,
diversification and distribution
requirements necessary to establish and
maintain RIC qualification under
Subchapter M. The Subchapter M
diversification tests generally require
that (i) the Fund invest no more than
25% of its total assets in securities
(other than securities of the U.S.
government or other RICs) of any one
issuer or two or more issuers that are
13 As of October 19, 2010, government debt of
China, Hong Kong, India, Malaysia, Singapore,
South Korea, Taiwan and Thailand was rated
investment grade by S&P and Fitch. The sovereign
debt of Indonesia and the Philippines was rated just
below investment grade. See https://
www.standardandpoors.com; https://
www.fitchratings.com.
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controlled by the Fund and that are
engaged in the same, similar or related
trades or businesses, and (ii) at least
50% of the Fund’s total assets consist of
cash and cash items, U.S. government
securities, securities of other RICs and
other securities, with investments in
such other securities limited in respect
of any one issuer to an amount not
greater than 5% of the value of the
Fund’s total assets and 10% of the
outstanding voting securities of such
issuer.
In addition to satisfying the above
referenced RIC diversification
requirements, no portfolio security held
by the Fund (other than U.S.
government securities and non-U.S.
government securities) will represent
more than 30% of the weight of the
portfolio and the five highest weighted
portfolio securities of the Fund (other
than U.S. government securities and/or
non-U.S. government securities) will not
in the aggregate account for more than
65% of the weight of the portfolio. For
these purposes, the Fund may treat
repurchase agreements collateralized by
U.S. government securities or non-U.S.
government securities as U.S. or nonU.S. government securities, as
applicable.
Money Market Securities
The Fund intends to invest in Money
Market Securities in order to help
manage cash flows in and out of the
Fund, such as in connection with
payment of dividends or expenses, and
to satisfy margin requirements, to
provide collateral or to otherwise back
investments in derivative instruments.
For these purposes, Money Market
Securities include: short-term, highquality obligations issued or guaranteed
by the U.S. Treasury or the agencies or
instrumentalities of the U.S.
government; short-term, high-quality
securities issued or guaranteed by nonU.S. governments, agencies and
instrumentalities; repurchase
agreements backed by U.S. government
securities; money market mutual funds;
and deposits and other obligations of
U.S. and non-U.S. banks and financial
institutions. All Money Market
Securities acquired by the Fund will be
rated investment grade; except that the
Fund may invest in unrated Money
Market Securities that are deemed by
the Adviser or Sub-Adviser to be of
comparable quality to money market
securities rated investment grade.
Derivative Instruments
The Fund may use derivative
instruments as part of its investment
strategies. Examples of derivative
instruments include listed futures
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contracts,14 forward currency contracts,
non-deliverable forward currency
contracts, currency and interest rate
swaps, currency options, options on
futures contracts, swap agreements and
credit-linked notes.15 The Fund’s use of
derivative instruments (other than
credit-linked notes) will be
collateralized or otherwise backed by
investments in short term, high-quality
U.S. money market securities. The Fund
expects that no more than 30% of the
value of the Fund’s net assets will be
invested in derivative instruments. Such
investments will be consistent with the
Fund’s investment objective and will
not be used to enhance leverage.
With respect to certain kinds of
derivative transactions entered into by
the Fund that involve obligations to
make future payments to third parties,
including, but not limited to, futures,
forward contracts, swap contracts, the
purchase of securities on a when-issued
or delayed delivery basis, or reverse
repurchase agreements, under
applicable Federal securities laws, rules,
and interpretations thereof, the Fund
must ‘‘set aside’’ liquid assets, or engage
in other measures to ‘‘cover’’ open
positions with respect to such
transactions.
The Fund may engage in foreign
currency transactions, and may invest
directly in foreign currencies in the
form of bank and financial institution
deposits, certificates of deposit, and
bankers acceptances denominated in a
specified non-U.S. currency. The Fund
may enter into forward currency
contracts in order to ‘‘lock in’’ the
exchange rate between the currency it
14 The listed futures contracts in which the Fund
will invest may be listed on exchanges either in the
U.S. or in either Hong Kong or Singapore. Both
Hong Kong’s primary financial markets regulator,
the Securities and Futures Commission, and
Singapore’s primary financial markets regulator, the
Monetary Authority of Singapore, are signatories to
the International Organization of Securities
Commissions (‘‘IOSCO’’) Multilateral Memorandum
of Understanding (‘‘MMOU’’), which is a multi-party
information sharing arrangement among major
financial regulators. Both the SEC and the
Commodity Futures Trading Commission are
signatories to the IOSCO MMOU.
15 The Fund may invest in credit-linked notes. A
credit linked note is a type of structured note whose
value is linked to an underlying reference asset.
Credit linked notes typically provide periodic
payments of interest as well as payment of principal
upon maturity. The value of the periodic payments
and the principal amount payable upon maturity
are tied (positively or negatively) to a reference
asset such as an index, government bond, interest
rate or currency exchange rate. The ongoing
payments and principal upon maturity typically
will increase or decrease depending on increases or
decreases in the value of the reference asset. The
Fund’s investments in credit-linked notes will be
limited to notes providing exposure to Asian Fixed
Income Securities. The Fund’s overall investment
in credit-linked notes will not exceed 25% of the
Fund’s assets.
PO 00000
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197
will deliver and the currency it will
receive for the duration of the contract.
The Fund may enter into swap
agreements, including interest rate
swaps and currency swaps (e.g., Hong
Kong dollar vs. U.S. dollar), and may
buy or sell put and call options on
foreign currencies, either on exchanges
or in the over-the-counter market. The
Fund may enter into repurchase
agreements with counterparties that are
deemed to present acceptable credit
risks, and may enter into reverse
repurchase agreements, which involve
the sale of securities held by the Fund
subject to its agreement to repurchase
the securities at an agreed upon date or
upon demand and at a price reflecting
a market rate of interest.
The Fund may invest in the securities
of other investment companies
(including money market funds and
ETFs). The Fund may invest up to an
aggregate amount of 10% of its net
assets in illiquid securities. Illiquid
securities include securities subject to
contractual or other restrictions on
resale and other instruments that lack
readily available markets.
The Fund will not invest in non-U.S.
equity securities.
The Shares
The Fund issues and redeems Shares
on a continuous basis at NAV 16 only in
large blocks of shares (‘‘Creation Units’’)
in transactions with authorized
participants. Creation Units consist of
100,000 Shares.17 The Fund issues and
redeems Creation Units in exchange for
a portfolio of Fixed Income Securities
closely approximating the holdings of
the Fund and/or an amount of cash in
U.S. dollars. Once created, Shares of the
Fund trade on the secondary market in
amounts less than a Creation Unit.
Additional information regarding the
Shares and the Fund, including
investment strategies, risks, creation and
redemption procedures, fees, portfolio
holdings disclosure policies,
distributions and taxes is included in
the Registration Statement.
Availability of Information
The Fund’s Web site (https://
www.wisdomtree.com), which will be
16 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 (‘‘NAV
Calculation Time’’). NAV per Share is calculated by
dividing the 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.
17 See E-mail from Timothy Malinowski, Senior
Director, NYSE Euronext, to Daniel Gien, Staff
Attorney, Division of Trading and Markets,
Commission, dated December 15, 2010.
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Federal Register / Vol. 76, No. 1 / Monday, January 3, 2011 / Notices
jlentini on DSKJ8SOYB1PROD with NOTICES
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 (‘‘Bid/Ask
Price’’),18 and a calculation of the
premium and discount of the Bid/Ask
Price against the NAV; and (2) data in
chart format displaying the frequency
distribution of discounts and premiums
of the daily Bid/Ask Price against the
NAV, within appropriate ranges, for
each of the four previous calendar
quarters. On each business day, before
commencement of trading in Shares in
the Core Trading Session 19 on the
Exchange, the Trust will disclose on its
Web site the identities and quantities of
the portfolio of securities and other
assets (‘‘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.20 The Disclosed
Portfolio will include, as applicable, the
names, quantity, percentage weighting
and market value of Fixed Income
Securities, and other assets held by the
Fund and the characteristics of such
assets. The Web site and information
will be publicly available at no charge.
In addition, for the Fund, an
estimated value, defined in 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 vendors at least every 15
seconds during the Core Trading
Session on the Exchange. In addition,
during hours when the markets for
Fixed Income Securities in the Fund’s
portfolio are closed, the Portfolio
Indicative Value will be updated at least
18 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 such Fund’s NAV. The records
relating to Bid/Ask Prices will be retained by the
Fund and its service providers.
19 The Core Trading Session is 9:30 a.m. to 4 p.m.
Eastern time.
20 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.
VerDate Mar<15>2010
15:48 Dec 30, 2010
Jkt 223001
every 15 seconds during the Core
Trading Session to reflect currency
exchange fluctuations.
The dissemination of the Portfolio
Indicative Value, together with the
Disclosed Portfolio, will allow investors
to determine the value of the underlying
portfolio of the 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
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.
Intra-day and end-of-day prices are
readily available through major market
data providers and broker-dealers for
the Fixed Income Securities, Money
Market Securities and derivative
instruments held by the Fund.
Shares will be subject to Rule
8.600(d)(2)(D), which sets forth
circumstances under which Shares of
the Fund may be halted.
Initial and Continued Listing
The Shares will be subject to Rule
8.600, which sets forth the initial and
continued listing criteria applicable to
Managed Fund Shares. The Exchange
represents that, for initial and/or
continued listing, the Shares must be in
compliance with Rule 10A–3 under the
Exchange Act,21 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 and the Disclosed
Portfolio will be made available to all
market participants at the same time.
Surveillance
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
and/or financial instruments comprising
the Disclosed Portfolio 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
21 See
PO 00000
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Frm 00118
Fmt 4703
Sfmt 4703
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.
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 the ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement.22
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
22 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 the ISG or with which the Exchange has
in place a comprehensive surveillance sharing
agreement.
E:\FR\FM\03JAN1.SGM
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Federal Register / Vol. 76, No. 1 / Monday, January 3, 2011 / Notices
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 after 4:00 p.m.
Eastern time each trading day.
jlentini on DSKJ8SOYB1PROD with NOTICES
2. Statutory Basis
The basis under the Exchange Act for
this proposed rule change is the
requirement under Section 6(b)(5) 23
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 Rule 8.600
are intended to protect investors and the
public interest.
23 15
U.S.C. 78f(b)(5).
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15:48 Dec 30, 2010
Jkt 223001
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
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.
199
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
also will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca-2010–116 and should be
submitted on or before January 18, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Florence E. Harmon,
Deputy Secretary.
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:
[FR Doc. 2010–32943 Filed 12–30–10; 8:45 am]
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–2010–116 on
the subject line.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change Relating to the
Listing and Trading of the ProShares
VIX Short-Term Futures ETF and the
ProShares VIX Mid-Term Futures ETF
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–2010–116. 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
PO 00000
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63610; File No. SR–
NYSEArca–2010–10]
December 27, 2010.
I. Introduction
On November 5, 2010, NYSE Arca,
Inc. (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
ProShares VIX Short-Term Futures ETF
and the ProShares VIX Mid-Term
Futures ETF (‘‘Funds’’) of the ProShares
Trust II (‘‘Trust’’) under NYSE Arca
Equities Rule 8.200, Commentary .02.
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\03JAN1.SGM
03JAN1
]]>Agencies
[Federal Register Volume 76, Number 1 (Monday, January 3, 2011)]
[Notices]
[Pages 194-199]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32943]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63609; File No. SR-NYSEArca-2010-116]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to the Listing and Trading of the
WisdomTree Asia Bond Fund
December 27, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that, on December 13, 2010, NYSE Arca, Inc.
(``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
the Exchange. 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\ 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 WisdomTree Trust (``Trust'') under NYSE Arca Equities Rule
8.600 (``Managed Fund Shares''): WisdomTree Asia Bond Fund (``Fund'').
The shares of the Fund are collectively referred to herein as the
``Shares.'' \3\ The text of the proposed rule change is available at
the Exchange, the Commission's Public Reference Room, and https://www.nyse.com.
---------------------------------------------------------------------------
\3\ See Form 19b-4 Information of the proposed rule change at 3.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares of the
WisdomTree Asia Bond 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
[[Page 195]]
be an actively managed exchange-traded fund. The Shares will be offered
by the Trust, which was established as a Delaware statutory trust on
December 15, 2005. The Trust is registered with the Commission as an
investment company and the Fund has filed a registration statement on
Form N-1A (``Registration Statement'') with the Commission.\5\
---------------------------------------------------------------------------
\4\ The Commission approved NYSE Arca Equities Rule 8.600 and
the listing and trading of certain funds of the PowerShares Actively
Managed Funds Trust on the Exchange pursuant to Rule 8.600 in
Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR
19544 (April 10, 2008) (SR-NYSEArca-2008-25). The Commission also
previously approved listing and trading on the Exchange of a number
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);
58564 (September 17, 2008), 73 FR 55194 (September 24, 2008) (SR-
NYSEArca-2008-86) (order approving Exchange listing and trading of
WisdomTree Dreyfus Emerging Markets Fund); 62604 (July 30, 2010), 75
FR 47323 (August 5, 2010) (SR-NYSEArca-2010-49) (order approving
listing and trading of WisdomTree Emerging Markets Local Debt Fund);
62623 (August 2, 2010), 75 FR 47652 (August 6, 2010) (SR-NYSEArca-
2010-51) (order approving listing and trading of WisdomTree Dreyfus
Commodity Currency Fund).
\5\ See Post-Effective Amendment No. 41 to Registration
Statement on Form N-1A for the Trust, dated October 19, 2010 (File
Nos. 333-132380 and 811-21864). The descriptions of the Fund and the
Shares contained herein are based on information in the Registration
Statement.
---------------------------------------------------------------------------
Description of the Shares and the Fund
WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'')
is the investment adviser (``Adviser'') to the Fund.\6\ WisdomTree
Asset Management is not affiliated with any broker-dealer. Mellon
Capital Management serves as sub-adviser for the Fund (``Sub-
Adviser'').\7\ The Bank of New York Mellon is the administrator,
custodian and transfer agent for the Trust. ALPS Distributors, Inc.
serves as the distributor for the Trust.\8\
---------------------------------------------------------------------------
\6\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is
the parent company of WisdomTree Asset Management.
\7\ The Sub-Adviser is responsible for day-to-day management of
the Fund and, as such, typically makes all decisions with respect to
portfolio holdings. The Adviser has ongoing oversight
responsibility.
\8\ The Commission has issued an order granting certain
exemptive relief to the Trust under the Investment Company Act of
1940 (15 U.S.C. 80a-1) (``1940 Act''). See Investment Company Act
Release No. 28171 (October 27, 2008) (File No. 812-13458). In
compliance with Commentary .05 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 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.\9\ 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
Sub-Adviser is affiliated with multiple broker-dealers and has
implemented a ``fire wall'' with respect to such broker-dealers
regarding access to information concerning the composition and/or
changes to the Fund's portfolio.\10\ In addition, Sub-Adviser personnel
who make decisions regarding the Fund's portfolio are subject to
procedures designed to prevent the use and dissemination of material
nonpublic information regarding the Fund's portfolio. In the event (a)
the Adviser or the Sub-Adviser becomes newly affiliated with a broker-
dealer, or (b) any new adviser or sub-adviser becomes affiliated with a
broker-dealer, they will be required to implement a fire wall with
respect to such broker-dealer regarding access to information
concerning the composition and/or changes to the portfolio.
---------------------------------------------------------------------------
\9\ 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 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.
\10\ The Exchange represents that the Adviser and Sub-Adviser,
and their 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 adviser 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 adviser 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 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.
---------------------------------------------------------------------------
WisdomTree Asia Bond Fund
According to the Registration Statement, the Fund seeks to provide
investors with a high level of total return consisting of both income
and capital appreciation. The Fund is an actively managed exchange-
traded fund (``ETF''). The Fund is designed to provide exposure to a
broad range of Asian government and corporate bonds through investment
in both local currency (e.g., Hong Kong dollar; South Korean won) and
U.S. dollar-denominated Fixed Income Securities. For purposes of this
proposed rule change, Fixed Income Securities include bonds, notes or
other debt obligations, such as government or corporate bonds,
denominated in local currencies or U.S. dollars, as well as issues
denominated in Asian local currencies that are issued by
``supranational issuers,'' such as the European Investment Bank,
International Bank for Reconstruction and Development, and the
International Finance Corporation, as well as development agencies
supported by other national governments. The Fund may also invest in
Money Market Securities and derivative instruments, as described below.
The Fund seeks to achieve its investment objective through direct
and indirect investments in Fixed Income Securities issued by
governments and corporations in Asian countries. The Fund intends to
focus on the developing/emerging market economies in Asia, primarily
China, Hong Kong, India, Indonesia, South Korea, Malaysia, the
Philippines, Singapore, Taiwan and Thailand. While the Fund is
permitted to invest in developed market economies, this is not a focus
of the Fund. Therefore, although the Fund is permitted to do so, the
Fund is unlikely to invest in issuers in Japan, Australia, or New
Zealand.
The Fund is designed to provide broad exposure to Asian government
and corporate bonds and will invest in a range of instruments with
varying credit risk and duration. The Fund
[[Page 196]]
intends to invest in both bonds and debt instruments issued by the
governments of Asia and their agencies and instrumentalities and as
well in bonds and other debt instruments issued by corporations
organized in Asian countries. The Fund also may invest in Fixed Income
Securities denominated in Asian local currencies that are issued by
supranational issuers, as described above. The Fund also may invest in
inflation-linked Fixed Income Securities denominated in Asian local
currencies.
The Fund intends to invest at least 70% of its net assets in Fixed
Income Securities.\11\ The Fund expects to invest up to 20% of its net
assets in Asian corporate bonds. The Fund will invest only in corporate
bonds that the Adviser or Sub-Adviser deems to be sufficiently liquid.
Generally, a corporate bond must have $200 million or more par amount
outstanding and significant par value traded to be considered as an
eligible investment.\12\ Economic and other conditions in Asia may,
from time to time, lead to a decrease in the average par amount
outstanding of bond issuances. Therefore, although the Fund does not
intend to do so, the Fund may invest up to 5% of its net assets in
corporate bonds with less than $200 million par amount outstanding if
(i) the Adviser or Sub-Adviser deems such security to be sufficiently
liquid based on its analysis of the market for such security (based on,
for example, broker-dealer quotations or its analysis of the trading
history of the security or the trading history of other securities
issued by the issuer), (ii) such investment is consistent with the
Fund's goal of providing exposure to a broad range of Asian government
and corporate bonds, and (iii) such investment is deemed by the Adviser
or Sub-Adviser to be in the best interest of the Fund.
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\11\ The category of ``Asian debt'' includes both U.S. dollar-
denominated debt and non-U.S. or ``local'' currency debt. According
to the Emerging Markets Traders Association, the global dollar
amount of emerging market debt instruments traded in 2009 was $4.445
trillion, of which Asian emerging market (i.e., excluding Japan)
debt represented $1.609 trillion. Asian sovereign debt issued by
major emerging market countries in 2009 included: (1) China, $175
billion; (2) Hong Kong, $590 billion; (3) India, $164 billion; (4)
Indonesia, $63 billion; (5) Malaysia, $119 billion; (6) Philippines,
$61 billion; (7) Singapore, $166 billion; (8) South Korea, $172
billion; (9) Taiwan, $27 billion; and (10) Thailand, $43 billion.
Local market instruments traded among major Asian emerging markets
in 2009 included: (1) Hong Kong, $557 billion; (2) India, $148
billion; (3) China, $147 billion; (4) Singapore, $146 billion; and
(5) South Korea, $93 billion. (Source: Emerging Markets Traders
Association, 2009 Annual Debt Trading Volume Survey, March 8, 2010.
Additional information relating to emerging market corporate bonds
is available at: https://www.emta.org.) Local currency bond issuance
in emerging East Asian markets (comprising China, Hong Kong, Taiwan,
Indonesia, South Korea, Malaysia, Philippines, Singapore, Thailand
and Viet Nam) grew by 18.8% through June 2010. (Source: Asian
Development Bank, Asia's Local Bond Markets Expand 18.8%, Foreign
Investment Soars (October 4, 2010), https://www.adb.org.)
The Adviser represents that Asian sovereign debt is typically
issued in large par size and tends to be very liquid. Local
currency-denominated Asian debt issued by supranational entities is
also actively traded. Intra-day, executable price quotations on such
instruments are available from major broker-dealer firms. Intra-day
price information is available through subscription services, such
as Bloomberg and Thomson Reuters, which can be accessed by
Authorized Participants and other investors.
\12\ The Adviser represents that the size and liquidity of the
market for emerging market bonds, including Asian corporate bonds,
generally has been increasing in recent years. The aggregate dollar
amount of emerging market corporate bonds traded in 2009 was $514
billion, representing a 32% increase over the $380 billion traded in
2008. Turnover in emerging market corporate debt accounted for 12%
of the overall volume of emerging market debt of $4.445 trillion in
2009, an increase over the 9% share in 2008. (Source: Emerging
Markets Traders Association Press Release, March 8, 2010.)
Additional information relating to emerging market corporate bonds
is available at: https://www.emta.org. Annual growth in the emerging
East Asian corporate bond markets (comprising China, Hong Kong,
Taiwan, Indonesia, South Korea, Malaysia, Philippines, Singapore,
Thailand and Viet Nam) increased by 24.4% through June 2010. China's
local currency corporate bond market grew by 52.7% over that period.
(Source: Asian Development Bank, Asia's Local Bond Markets Expand
18.8%, Foreign Investment Soars (October 4, 2010), https://www.adb.org.) Corporate bonds outstanding in representative emerging
East Asian markets as of June 2010, included: (1) China, $546
billion; (2) Hong Kong, $73 billion; (3) Indonesia, $10 billion; (4)
South Korea, $571 billion; (5) Malaysia, $91 billion; (6)
Philippines, $8 billion; (7) Singapore, $70 billion; (8) Thailand,
$38 billion; and (9) Viet Nam, $2 billion (Source: Asian Development
Bank, Asia Bond Monitor (October 2010), https://www.adb.org.)
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According to the Registration Statement, the Fund typically will
maintain aggregate portfolio duration of between 2 and 8 years.
Aggregate portfolio duration is a measure of the portfolio's
sensitivity to changes in the level of interest rates. The Fund's
actual portfolio duration may be longer or shorter depending upon
market conditions.
The universe of Asian Fixed Income Securities includes securities
that are rated ``investment grade'' as well as ``non-investment grade''
securities. The Fund is designed to provide a broad-based,
representative exposure to Asian government and corporate bonds and
therefore will invest in both investment grade and non-investment grade
securities in a manner designed to provide this exposure. The Fund
expects that it will have 75% or more of its assets invested in
investment grade securities, and no more than 25% of its assets
invested in non-investment grade securities. Because the Fund is
designed to provide exposure to a broad range of Asian government and
corporate bonds, and because the debt ratings of the Asian governments
and those corporate issuers will change from time to time, the exact
percentage of the Fund's investments in investment grade and non-
investment grade securities will change from time to time in response
to economic events and changes to the credit ratings of the Asian
government and corporate issuers.\13\ Within the non-investment grade
category, some issuers and instruments are considered to be of lower
credit quality and at higher risk of default. In order to limit its
exposure to these more speculative credits, the Fund will not invest
more than 15% of its assets in securities rated B or below by Moody's,
or equivalently rated by S&P or Fitch. The Fund does not intend to
invest in unrated securities. However, it may do so to a limited
extent, such as where a rated security becomes unrated, if such
security is, determined by the Adviser and Sub-Adviser to be of
comparable quality. In determining whether a security is of
``comparable quality,'' the Adviser and Sub-Adviser will consider, for
example, whether the issuer of the security has issued other rated
securities.
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\13\ As of October 19, 2010, government debt of China, Hong
Kong, India, Malaysia, Singapore, South Korea, Taiwan and Thailand
was rated investment grade by S&P and Fitch. The sovereign debt of
Indonesia and the Philippines was rated just below investment grade.
See https://www.standardandpoors.com; https://www.fitchratings.com.
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The Fund will hold Fixed Income Securities of at least 13 non-
affiliated issuers. The Fund will not concentrate 25% or more of the
value of its total assets (taken at market value at the time of each
investment) in any one industry, as that term is used in the 1940 Act
(except that this restriction does not apply to obligations issued by
the U.S. government, or any non-U.S. government, or their respective
agencies and instrumentalities or government-sponsored enterprises).
The Fund intends to qualify each year as a regulated investment
company (``RIC'') under Subchapter M of the Internal Revenue Code of
1986, as amended. The Fund will invest its assets, and otherwise
conduct its operations, in a manner that is intended to satisfy the
qualifying income, diversification and distribution requirements
necessary to establish and maintain RIC qualification under Subchapter
M. The Subchapter M diversification tests generally require that (i)
the Fund invest no more than 25% of its total assets in securities
(other than securities of the U.S. government or other RICs) of any one
issuer or two or more issuers that are
[[Page 197]]
controlled by the Fund and that are engaged in the same, similar or
related trades or businesses, and (ii) at least 50% of the Fund's total
assets consist of cash and cash items, U.S. government securities,
securities of other RICs and other securities, with investments in such
other securities limited in respect of any one issuer to an amount not
greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer.
In addition to satisfying the above referenced RIC diversification
requirements, no portfolio security held by the Fund (other than U.S.
government securities and non-U.S. government securities) will
represent more than 30% of the weight of the portfolio and the five
highest weighted portfolio securities of the Fund (other than U.S.
government securities and/or non-U.S. government securities) will not
in the aggregate account for more than 65% of the weight of the
portfolio. For these purposes, the Fund may treat repurchase agreements
collateralized by U.S. government securities or non-U.S. government
securities as U.S. or non-U.S. government securities, as applicable.
Money Market Securities
The Fund intends to invest in Money Market Securities in order to
help manage cash flows in and out of the Fund, such as in connection
with payment of dividends or expenses, and to satisfy margin
requirements, to provide collateral or to otherwise back investments in
derivative instruments. For these purposes, Money Market Securities
include: short-term, high-quality obligations issued or guaranteed by
the U.S. Treasury or the agencies or instrumentalities of the U.S.
government; short-term, high-quality securities issued or guaranteed by
non-U.S. governments, agencies and instrumentalities; repurchase
agreements backed by U.S. government securities; money market mutual
funds; and deposits and other obligations of U.S. and non-U.S. banks
and financial institutions. All Money Market Securities acquired by the
Fund will be rated investment grade; except that the Fund may invest in
unrated Money Market Securities that are deemed by the Adviser or Sub-
Adviser to be of comparable quality to money market securities rated
investment grade.
Derivative Instruments
The Fund may use derivative instruments as part of its investment
strategies. Examples of derivative instruments include listed futures
contracts,\14\ forward currency contracts, non-deliverable forward
currency contracts, currency and interest rate swaps, currency options,
options on futures contracts, swap agreements and credit-linked
notes.\15\ The Fund's use of derivative instruments (other than credit-
linked notes) will be collateralized or otherwise backed by investments
in short term, high-quality U.S. money market securities. The Fund
expects that no more than 30% of the value of the Fund's net assets
will be invested in derivative instruments. Such investments will be
consistent with the Fund's investment objective and will not be used to
enhance leverage.
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\14\ The listed futures contracts in which the Fund will invest
may be listed on exchanges either in the U.S. or in either Hong Kong
or Singapore. Both Hong Kong's primary financial markets regulator,
the Securities and Futures Commission, and Singapore's primary
financial markets regulator, the Monetary Authority of Singapore,
are signatories to the International Organization of Securities
Commissions (``IOSCO'') Multilateral Memorandum of Understanding
(``MMOU''), which is a multi-party information sharing arrangement
among major financial regulators. Both the SEC and the Commodity
Futures Trading Commission are signatories to the IOSCO MMOU.
\15\ The Fund may invest in credit-linked notes. A credit linked
note is a type of structured note whose value is linked to an
underlying reference asset. Credit linked notes typically provide
periodic payments of interest as well as payment of principal upon
maturity. The value of the periodic payments and the principal
amount payable upon maturity are tied (positively or negatively) to
a reference asset such as an index, government bond, interest rate
or currency exchange rate. The ongoing payments and principal upon
maturity typically will increase or decrease depending on increases
or decreases in the value of the reference asset. The Fund's
investments in credit-linked notes will be limited to notes
providing exposure to Asian Fixed Income Securities. The Fund's
overall investment in credit-linked notes will not exceed 25% of the
Fund's assets.
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With respect to certain kinds of derivative transactions entered
into by the Fund that involve obligations to make future payments to
third parties, including, but not limited to, futures, forward
contracts, swap contracts, the purchase of securities on a when-issued
or delayed delivery basis, or reverse repurchase agreements, under
applicable Federal securities laws, rules, and interpretations thereof,
the Fund must ``set aside'' liquid assets, or engage in other measures
to ``cover'' open positions with respect to such transactions.
The Fund may engage in foreign currency transactions, and may
invest directly in foreign currencies in the form of bank and financial
institution deposits, certificates of deposit, and bankers acceptances
denominated in a specified non-U.S. currency. The Fund may enter into
forward currency contracts in order to ``lock in'' the exchange rate
between the currency it will deliver and the currency it will receive
for the duration of the contract.
The Fund may enter into swap agreements, including interest rate
swaps and currency swaps (e.g., Hong Kong dollar vs. U.S. dollar), and
may buy or sell put and call options on foreign currencies, either on
exchanges or in the over-the-counter market. The Fund may enter into
repurchase agreements with counterparties that are deemed to present
acceptable credit risks, and may enter into reverse repurchase
agreements, which involve the sale of securities held by the Fund
subject to its agreement to repurchase the securities at an agreed upon
date or upon demand and at a price reflecting a market rate of
interest.
The Fund may invest in the securities of other investment companies
(including money market funds and ETFs). The Fund may invest up to an
aggregate amount of 10% of its net assets in illiquid securities.
Illiquid securities include securities subject to contractual or other
restrictions on resale and other instruments that lack readily
available markets.
The Fund will not invest in non-U.S. equity securities.
The Shares
The Fund issues and redeems Shares on a continuous basis at NAV
\16\ only in large blocks of shares (``Creation Units'') in
transactions with authorized participants. Creation Units consist of
100,000 Shares.\17\ The Fund issues and redeems Creation Units in
exchange for a portfolio of Fixed Income Securities closely
approximating the holdings of the Fund and/or an amount of cash in U.S.
dollars. Once created, Shares of the Fund trade on the secondary market
in amounts less than a Creation Unit.
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\16\ 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 (``NAV
Calculation Time''). NAV per Share is calculated by dividing the
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.
\17\ See E-mail from Timothy Malinowski, Senior Director, NYSE
Euronext, to Daniel Gien, Staff Attorney, Division of Trading and
Markets, Commission, dated December 15, 2010.
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Additional information regarding the Shares and the Fund, including
investment strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions and taxes is
included in the Registration Statement.
Availability of Information
The Fund's Web site (https://www.wisdomtree.com), which will be
[[Page 198]]
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 (``Bid/Ask Price''),\18\ and a calculation of
the premium and discount of the Bid/Ask Price against the NAV; and (2)
data in chart format displaying the frequency distribution of discounts
and premiums of the daily Bid/Ask Price against the NAV, within
appropriate ranges, for each of the four previous calendar quarters. On
each business day, before commencement of trading in Shares in the Core
Trading Session \19\ on the Exchange, the Trust will disclose on its
Web site the identities and quantities of the portfolio of securities
and other assets (``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.\20\ The Disclosed Portfolio will include, as applicable,
the names, quantity, percentage weighting and market value of Fixed
Income Securities, and other assets held by the Fund and the
characteristics of such assets. The Web site and information will be
publicly available at no charge.
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\18\ 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 such Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
\19\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern
time.
\20\ 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.
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In addition, for the Fund, an estimated value, defined in 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 vendors at least every 15
seconds during the Core Trading Session on the Exchange. In addition,
during hours when the markets for Fixed Income Securities in the Fund's
portfolio are closed, the Portfolio Indicative Value will be updated at
least every 15 seconds during the Core Trading Session to reflect
currency exchange fluctuations.
The dissemination of the Portfolio Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the 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 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.
Intra-day and end-of-day prices are readily available through major
market data providers and broker-dealers for the Fixed Income
Securities, Money Market Securities and derivative instruments held by
the Fund.
Initial and Continued Listing
The Shares will be subject to Rule 8.600, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Shares must be in compliance with Rule 10A-3 under the
Exchange Act,\21\ 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 and the Disclosed Portfolio will be made
available to all market participants at the same time.
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\21\ See 17 CFR 240.10A-3.
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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 and/or financial instruments comprising the
Disclosed Portfolio 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 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.
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
the ISG or with which the Exchange has entered into a comprehensive
surveillance sharing agreement.\22\
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\22\ 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 the ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
[[Page 199]]
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 after 4:00 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) \23\ 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 Rule 8.600 are intended to protect investors and
the public interest.
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\23\ 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 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-2010-116 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-2010-116. 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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSEArca-2010-116 and should be submitted on or before January 18,
2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-32943 Filed 12-30-10; 8:45 am]
BILLING CODE 8011-01-P
