Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade the WisdomTree Global Real Return Fund, 27127-27134 [2011-11327]

Download as PDF Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices 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 (i) As the Commission may designate up to 90 days of such date 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 such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. 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 No. SR–CBOE– 2011–044 and should be submitted on or before May 31, 2011. Trust (‘‘Trust’’) under NYSE Arca Equities Rule 8.600: WisdomTree Global Real Return Fund (‘‘Fund’’). The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and http:// www.nyse.com. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Elizabeth M. Murphy, Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2011–11381 Filed 5–9–11; 8:45 am] Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2011–044 on the subject line. jlentini on DSKJ8SOYB1PROD with NOTICES 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: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade the WisdomTree Global Real Return Fund BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64411; File No. SR– NYSEArca-2011–21] May 5, 2011. 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 Paper Comments on April 20, 2011, NYSE Arca, Inc. • Send paper comments in triplicate (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with to Elizabeth M. Murphy, Secretary, the Securities and Exchange Securities and Exchange Commission, Commission (‘‘Commission’’) the 100 F Street, NE., Washington DC proposed rule change as described in 20549–1090. Items I and II below, which Items have All submissions should refer to File been prepared by the Exchange. The Number SR–CBOE–2011–044. This file Commission is publishing this notice to number should be included on the solicit comments on the proposed rule subject line if e-mail is used. To help the change from interested persons. Commission process and review your I. Self-Regulatory Organization’s comments more efficiently, please use only one method. The Commission will Statement of the Terms of Substance of post all comments on the Commission’s the Proposed Rule Change Internet Web site (http://www.sec.gov/ The Exchange proposes to list and rules/sro.shtml). Copies of the trade the shares (‘‘Shares’’) of the submission, all subsequent following series of the WisdomTree amendments, all written statements with respect to the proposed rule 12 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). change that are filed with the 2 17 CFR 240.19b–4. Commission, and all written VerDate Mar<15>2010 18:02 May 09, 2011 Jkt 223001 27127 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1. Purpose The Exchange proposes to list and trade the Shares of the Fund under NYSE Arca Equities Rule 8.600,3 which governs the listing and trading of ‘‘Managed Fund Shares,’’ on the Exchange.4 The Fund will be an actively 3 NYSE Arca Equities Rule 8.600(c)(1) provides that a Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a) (‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index, or combination thereof. 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, or trading on the Exchange pursuant to unlisted trading privileges (‘‘UTP’’), 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 Currency Fund); 60981 (November 10, 2009), 74 FR 59594 (November 18, 2009) (SR– NYSEArca-2009–79) (order approving listing of five E:\FR\FM\10MYN1.SGM Continued 10MYN1 27128 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices managed exchange-traded fund (‘‘ETF’’). The Shares will be offered by the Trust, which was established as a Delaware statutory trust on December 15, 2005. The Fund is registered with the Commission as an investment company.5 The Fund was formerly known as the ‘‘WisdomTree Real Return Fund.’’ The Commission approved listing and trading on the Exchange of the WisdomTree Real Return Fund pursuant to Section 19(b)(2) of the Exchange Act in March 2010.6 The Fund Shares have not yet been listed and have not commenced trading, and the Fund seeks to make certain changes to its investment strategy that are not reflected in the March 12, 2010 Order. The Exchange seeks to propose the listing and trading of Shares of the Fund based on this new investment strategy, as described herein. jlentini on DSKJ8SOYB1PROD with NOTICES Description of the Shares and the Fund WisdomTree Asset Management, Inc. (‘‘WisdomTree Asset Management’’) is the investment adviser to the Fund (‘‘Adviser’’).7 WisdomTree Asset Management is not affiliated with any broker-dealer. Mellon Capital Management Corporation (‘‘SubAdviser’’) serves as the sub-adviser for the Fund.8 The Bank of New York Mellon is the administrator, custodian, and transfer agent for the Fund. ALPS Distributors, Inc. serves as the distributor (‘‘Distributor’’) for the Fund.9 fixed income funds of the PIMCO ETF Trust); 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); 63598 (December 22, 2010), 75 FR 82106 (December 29, 2010) (SR–NYSEArca-2010–98) (order approving listing and trading of WisdomTree Managed Futures Strategy Fund); 63919 (February 16, 2011), 76 FR 10073 (February 23, 2011) (SR–NYSEArca-2010– 116) (order approving listing and trading of WisdomTree Asia Local Debt Fund). 5 See Post Effective Amendment No. 43 to the Registration Statement on Form N–1A for the Trust filed with the Securities and Exchange Commission on February 4, 2011 (File Nos. 333–132380 and 811–21864) (‘‘Registration Statement’’). The descriptions of the Fund and the Shares contained herein are based on information in the Registration Statement. 6 See Securities Exchange Act Release No. 61697 (March 12, 2010), 75 FR 13616 (March 22, 2010) (SR–NYSEArca-2010–04) (‘‘March 12, 2010 Order’’). 7 WisdomTree Investments, Inc. (‘‘WisdomTree Investments’’) is the parent company of WisdomTree Asset Management. 8 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. 9 The Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 28471 (October 27, 2008) (File No. 812–13458). In VerDate Mar<15>2010 18:02 May 09, 2011 Jkt 223001 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 and/or changes to such Investment Company portfolio.10 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 non-public information regarding the open-end fund’s portfolio. 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. 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 implement a fire wall with respect to such broker-dealer regarding access to information concerning the composition and/or changes to a portfolio. compliance with Commentary .04 to NYSE Arca Equities Rule 8.600, 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). 10 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (‘‘Advisers Act’’). As a result, the Adviser and Sub-Adviser and their related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 WisdomTree Global Real Return Fund According to the Registration Statement, the Fund seeks total returns that exceed the rate of inflation over long-term investment horizons. To achieve its objective, the Fund will invest in Fixed Income Securities (defined below) and other instruments designed to provide protection against inflation. The Fund will be actively managed and will have targeted exposure to commodities and commodity strategies. Using this approach, the Fund will seek to provide investors with both inflation protection and income. Fixed Income Securities The Fund intends to invest at least 70% of its net assets in Fixed Income Securities. For these purposes, Fixed Income Securities include bonds, notes, or other debt obligations, such as government or corporate bonds, denominated in U.S. dollars or non-U.S. currencies. The Fund will invest in Fixed Income Securities tied to U.S. inflation rates, such as U.S. Treasury Inflation Protected Securities (‘‘TIPS’’).11 The Fund also will invest in inflationlinked Fixed Income Securities tied to non-U.S. inflation rates.12 The Fund’s investments outside the United States will focus on inflation-linked securities from countries that are leading exporters of global commodities, such as Australia, Brazil, Canada, Chile, and South Africa. The Fund will not invest more than 35% of its net assets in Fixed Income Securities of issuers in emerging markets.13 The Fund may invest in 11 According to the U.S. Treasury Web site, as of March 17, 2011, the market for TIPS is the largest inflation indexed securities market in the world with over $550 billion of TIPS outstanding. (Source: United States Department of the Treasury, Overview of Treasury Inflation-Indexed Securities, http://www.treasury.gov/resource-center/fin-mkts/ Pages/tips.aspx). The Adviser represents that this market is highly liquid and transparent. 12 As of December 31, 2010, the total market capitalization of inflation-linked bonds in the Barclays Capital World Inflation Linked Index, a leading index of inflation-linked bonds in developed markets outside the United States, was approximately $1 trillion. As of December 31, 2010, the total market capitalization of inflation-linked bonds in the Barclays Capital Emerging Markets Government Inflation Linked Bond Index, a leading index of inflation-linked debt issued by emerging market governments, was approximately $408 billion. The Adviser represents that inflation-linked bonds outside the United States are issued in large par size (i.e., $200 million or more) and tend to be liquid. 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. 13 According to the Adviser, while there is no universally accepted definition of what constitutes an ‘‘emerging market,’’ in general, emerging market E:\FR\FM\10MYN1.SGM 10MYN1 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES Fixed Income Securities that are not linked to inflation, such as U.S. or nonU.S. government bonds, as well as Fixed countries are characterized by developing commercial and financial infrastructure with significant potential for economic growth and increased capital market participation by foreign investors. The Adviser and Sub-Adviser look at a variety of commonly used factors when determining whether a country is an ‘‘emerging’’ market. In general, the Adviser and Sub-Adviser consider a country to be an emerging market if: (1) It is either (a) classified by the World Bank in the lower middle or upper middle income designation for one of the past 3 years (i.e., per capita gross national product of less than U.S. $9,385), or (b) classified by the World Bank as high income in each of the last three years, but with a currency that has been primarily traded on a nondelivered basis by offshore investors (e.g., Korea and Taiwan); and (2) The country’s debt market is considered relatively accessible by foreign investors in terms of capital flow and settlement considerations; and (3) The country has issued the equivalent of $5 billion in local currency sovereign debt. The criteria used to evaluate whether a country is an ‘‘emerging market’’ will change from time to time based on economic and other events. The category of ‘‘emerging market bonds’’ includes both U.S. dollar-denominated debt and non-U.S. or ‘‘local’’ currency debt. The global market for local currency debt is larger and more actively traded than the global market for dollardenominated debt. The total dollar amount of emerging market debt instruments traded through September 30, 2010 was $4.903 trillion. Turnover in local currency debt instruments during the same period was $3.44 trillion and accounted for approximately 70% of the total turnover in emerging market debt instruments. For calendar year 2009, the total dollar amount of emerging market debt instruments traded was $4.445 trillion. Turnover in local currency debt instruments in 2009 was $2.870 trillion and accounted for approximately 65% of the total turnover in emerging market debt instruments. (Source: Emerging Markets Traders Association Press Release(s) dated December 8, 2010, August 12, 2010, May 20, 2010, and March 8, 2010). As of December 31, 2010, the total market capitalization of emerging market local currency sovereign debt in the J.P. Morgan Government Bonds Index— Emerging Markets Global (‘‘GBI–EM Global’’) was $791 billion. This is an increase from $625 billion at the end of September 2009. The GBI–EM Global is a widely followed index of regularly traded, liquid, fixed-rate domestic currency government bonds. As of December 31, 2010, the market capitalization of emerging market dollardenominated bonds in the J.P. Morgan Emerging Markets Bond Index (‘‘EMBI’’) was approximately $370 billion. This is up from $326 billion at the end of September 2009. The EMBI is a widely followed index of U.S. dollar denominated debt instruments issued by emerging market sovereign and quasisovereign entities. (Source: J.P. Morgan as of December 31, 2010 and September 30, 2009). The Adviser represents that sovereign debt of many emerging market countries is issued in large par size and tends to be liquid. Locally denominated debt issued by supra-national entities, such as the European Investment Bank or the International Bank for Reconstruction and Development, is also actively traded. Intra-day, executable price quotations on emerging market debt instruments, including all instruments described above, 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. VerDate Mar<15>2010 18:02 May 09, 2011 Jkt 223001 Income Securities that pay variable or floating rates. The Fund expects that it will have at least 70% of its assets invested in investment grade securities, and no more than 30% of its assets invested in non-investment grade securities. Because the debt ratings of issuers will change from time to time, the exact percentage of the Fund’s investments in investment grade and non-investment grade Fixed Income Securities will change from time to time in response to economic events and changes to the credit ratings of such issuers.14 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 10% of its assets in securities rated BB 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. While the Fund intends to focus its investments in Fixed Income Securities on bonds andother obligations of U.S. and non-U.S. governments and agencies, the Fund may invest up to 20% of its net assets in corporate bonds. The Fund will invest only in corporate bonds that the Adviser or Sub-Adviser deems to be sufficiently liquid.15 Generally, a 14 As of December 31, 2010, government debt of the United States, Australia, Brazil, Canada, Chile, and South Africa was rated investment grade by S&P and Fitch. As noted, the Fund intends to focus its investment outside the United States in commodity-producing countries such as Australia, Brazil, Canada, Chile, and South Africa. 15 The Adviser represents that the size and liquidity of the market for corporate bonds, including corporate bonds of emerging market issuers, generally, has been increasing in recent years. The aggregate dollar amount of emerging market corporate bonds traded through the first three quarters of 2010 ($563 billion) exceeded the amount traded for the entire calendar year in 2009 ($514 billion). The $514 billion traded in 2009 represented a substantial increase over the amount traded in 2008 ($380 billion). Turnover in emerging market corporate debt has also increased significantly. Turnover in emerging market corporate debt through the first three quarters of 2010 was approximately 11.5% of the overall volume of emerging market debt of $4.903 trillion for the same period. This is similar to calendar year 2009 where 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: PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 27129 corporate bond must have $200 million or more par amount outstanding and significant par value traded to be considered as an eligible investment. Economic and other conditions 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), and (ii) such investment is deemed by the Adviser or SubAdviser to be in the best interest of the Fund. The Fund may invest in securities with effective or final maturities of any length. The Fund will seek to keep the average effective duration of its portfolio between 2 and 8 years. Effective duration is an indication of an investment’s interest rate risk or how sensitive an investment or a fund is to changes in interest rates. Generally, a fund or instrument with a longer effective duration is more sensitive to interest rate fluctuations, and therefore more volatile, than a fund with a shorter effective duration. The Fund’s actual portfolio duration may be longer or shorter depending on market conditions. The Fund intends to invest in Fixed Income Securities of at least 13 nonaffiliated 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).16 Although the Fund intends to invest in a variety of securities and instruments, the Fund will be considered non-diversified, which means that it may invest more of its assets in the securities of a smaller Emerging Markets Traders Association Press Release(s), December 8, 2010, August 12, 2010, May 20, 2010, and March 8, 2010.) 16 See Form N–1A, Item 9. The Commission has taken the position that a fund is concentrated if it invests more than 25% of the value of its total assets in any one industry. See, e.g., Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 54241 (November 21, 1975). E:\FR\FM\10MYN1.SGM 10MYN1 27130 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES number of issuers than if it were a diversified Fund.17 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.18 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 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 Fund, 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 Fund. 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 17 A ‘‘non-diversified company,’’ as defined in Section 5(b)(2) of the 1940 Act, means any management company other than a diversified company (as defined in Section 5(b)(1) of the 1940 Act). 18 26 U.S.C. 851. VerDate Mar<15>2010 18:02 May 09, 2011 Jkt 223001 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. The Fund does not intend to invest in any unrated Money Market Securities. Derivative Instruments and Other Investments The Fund may use derivative instruments as part of its investment strategies. 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. For example, the Fund may engage in swap transactions that provide exposure to inflation rates, inflation-linked bonds, inflation-sensitive indices, or interest rates.19 The Fund also may buy or sell listed futures contracts on U.S. Treasury securities, non-U.S. government securities, and major non-U.S. currencies. The Fund’s use of derivative instruments will be collateralized or otherwise backed by investments in short-term, high-quality U.S. money market securities. 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 and forward contracts, swap contracts, the purchase of securities on a whenissued or delayed delivery basis, or reverse repurchase agreements, the Fund, in accordance with applicable Federal securities laws, rules, and interpretations thereof, will ‘‘set aside’’ liquid assets, or engage in other measures to ‘‘cover’’ open positions with respect to such transactions.20 19 An inflation-linked swap is an agreement between two parties to exchange payments at a future date based on the difference between a fixed payment and a payment linked to an inflation rate or value at a future date. A typical interest rate swap involves the exchange of a floating interest rate payment for a fixed interest payment. 20 See 15 U.S.C. 80a–18. See also Investment Company Act Release No. 10666 (April 18, 1979), 44 FR 25128 (April 27, 1979); Dreyfus Strategic Investing, Commission No-Action Letter (June 22, 1987); Merrill Lynch Asset Management, L.P., Commission No-Action Letter (July 2, 1996). PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 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.21 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 15% 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.22 Investments in the WisdomTree Subsidiary and Commodity Strategies The Fund intends to have targeted exposure to commodities across a number of sectors, such as energy, precious metals, and agriculture. The Fund will seek to gain exposure to commodity markets through investments in a subsidiary organized in the Cayman Islands (‘‘Subsidiary’’). The Subsidiary is wholly-owned and controlled by the Fund, and its investments will be consolidated into the Fund’s financial statements. The Fund’s and Subsidiary’s investments will be disclosed on the Fund’s Web site 21 The Fund and the Subsidiary (as defined herein) will invest only in currencies, and instruments that provide exposure to such currencies, that have significant foreign exchange turnover and are included in the Bank for International Settlements Triennial Central Bank Survey, December 2007 (‘‘BIS Survey’’). Specifically, the Fund and Subsidiary may invest in currencies, and instruments that provide exposure to such currencies, selected from the top 40 currencies (as measured by percentage share of average daily turnover for the applicable month and year) included in the BIS Survey. 22 The Commission has stated that long-standing Commission guidelines have required open-end funds to hold no more than 15% of their net assets in illiquid securities and other illiquid assets. See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 14617 (March 18, 2008), footnote 34. See also Investment Company Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) (Statement Regarding ‘‘Restricted Securities’’); Investment Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) (Revisions of Guidelines to Form N–1A). A fund’s portfolio security is illiquid if it cannot be disposed of in the ordinary course of business within seven days at approximately the value ascribed to it by the fund. See Investment Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a–7 under the 1940 Act); Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under the Securities Act of 1933). E:\FR\FM\10MYN1.SGM 10MYN1 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES on a daily basis. The Fund’s investment in the Subsidiary may not exceed 25% of the Fund’s total assets at the end of each fiscal quarter. The Subsidiary’s shares will be offered only to the Fund, and the Fund will not sell shares of the Subsidiary to other investors. The Fund will not invest in any non-U.S. equity securities (other than shares of the Subsidiary). The Fund’s investment in the Subsidiary is designed to help the Fund achieve exposure to commodity returns in a manner consistent with the Federal tax requirements applicable to the Fund and other regulated investment companies. The Subsidiary will comply with the 1940 Act and will have essentially the same compliance policies and procedures as the Fund, except that, unlike the Fund, the Subsidiary may invest without limitation in commodity-linked investments. The Subsidiary will otherwise operate in essentially the same manner as the Fund. The Fund’s Registration Statement states that, since the Subsidiary’s investments are consolidated into the Fund’s, the Fund’s combined holdings (including the investments in the Subsidiary) must comply with the 1940 Act. The Subsidiary will achieve exposure to commodities through investments in a combination of listed commodity futures, commodity index swaps, and structured notes that provide commodity returns. A listed commodity future is a financial instrument in which a party agrees to pay a fixed price for a designated commodity at a specified future date. Listed commodity futures contracts are traded at market prices on exchanges pursuant to terms common to all market participants.23 A swap 23 The Subsidiary’s investments will be subject to applicable requirements of the Commodity Exchange Act (7 U.S.C. 1 et seq.) and rules thereunder, and to rules of applicable U.S. futures exchanges. The Subsidiary’s investments in commodity futures contracts will be limited by the application of position limits imposed by the Commodity Futures Trading Commission and U.S. futures exchanges intended to prevent undue influence on prices by a single trader or group of affiliated traders. The Adviser has represented that the Subsidiary intends to invest only in listed futures contracts that are heavily traded and are based on some of the world’s most liquid and actively-traded commodities. The Subsidiary intends to invest in or have exposure to the following listed futures contracts: Cocoa; coffee; corn; cotton; light crude oil; gold; heating oil; high grade copper; lean hogs; live cattle; natural gas; silver; soybeans; sugar; unleaded gas; and wheat. As of December 31, 2010, the three month Average Daily Dollar Volume (‘‘ADDV’’) of each of these contracts was: Cocoa (ADDV $224,966,443); coffee (ADDV $763,835,166); cotton (ADDV $902,108,625); corn (ADDV $4.308,052,565); crude oil (ADDV $29,502,020,531); gold (ADDV $13,311,058,209); heating oil (ADDV $4,890,080,900); high grade copper (ADDV VerDate Mar<15>2010 18:02 May 09, 2011 Jkt 223001 agreement is an agreement between two parties to exchange cash flows or returns (or differences in return) on a reference instrument, such as commodity or commodity index, according to agreed upon terms.24 The Subsidiary also may invest in commodity-linked notes.25 The Shares According to the Registration Statement, the Fund issues and redeems Shares on a continuous basis at net asset value (‘‘NAV’’) 26 only in large blocks of Shares, typically 100,000 Shares or more (‘‘Creation Unit Aggregations’’), in transactions with Authorized Participants. Only institutional investors who have entered into an Authorized Participant agreement purchase or redeem Creation Unit Aggregations. The consideration for purchase of Creation Unit Aggregations of the Fund generally consists of the in$106,356,378); lean hogs (ADDV $517,336,897); live cattle (ADDV $751,594,460); natural gas (ADDV $4,981,670,245); silver (ADDV $3,500,016,194); soybeans (ADDV $4,397,418.179); sugar (ADDV $1,808,678,695); unleaded gas (ADDV $3,950,780,447); and wheat (ADDV $1,675,560,847). 24 The Subsidiary intends to enter into over-thecounter swap transactions only with respect to transactions based on the commodities described herein or on major commodity indexes or indicators, such as the S&P GSCI Total Return Index, Dow Jones-UBS Commodity Returns Index or the AFT Commodity Trends Indicator (each, an ‘‘Index’’). Each Index is widely followed and serves as the basis for a variety of investment products (such as swap contracts). Intra-day, executable price quotations on such Indexes and commodities 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. 25 Commodity-linked notes are over-the-counter debt instruments, typically issued by a bank or broker-dealer, that are designed to provide cash flows linked to the value of a reference asset. They provide exposure, which may include long and/or short exposure, to the investment returns of the reference asset underlying the note. The performance of these notes is determined by the price movement of the reference asset underlying the note. The Subsidiary’s investment in commodity-linked notes will be limited to notes providing exposure to the commodities described herein or any commodity index. As noted, there is a liquid and active market for the commodities described herein. Intra-day and end-of-day prices are readily available through Bloomberg, other major market data providers and broker-dealers for the listed futures contracts and commodities described herein. As a result, information necessary to evaluate the value of any swap or commoditylinked note purchased by the Subsidiary will be readily available to market participants. 26 The NAV of the Fund’s Shares generally will be calculated once daily Monday through Friday as of the close of regular trading on the New York Stock Exchange, generally 4:00 p.m. Eastern time (‘‘NAV Calculation Time’’). NAV per Share will be 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. PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 27131 kind deposit of a designated portfolio of Fixed Income Securities held by the Fund (‘‘Deposit Securities’’) and an amount of cash (‘‘Cash Component’’). Together, the Deposit Securities and the Cash Component constitute the ‘‘Fund Deposit,’’ which represents the minimum initial and subsequent investment amount for a Creation Unit Aggregation of the Fund. Shares may be redeemed from the Fund only in Creation Unit Aggregations. Upon delivery and settlement of the Shares upon redemption, the Fund will deliver to the redeeming Authorized Participant a designated basket of fixed income securities (‘‘Portfolio Securities’’) and Cash Component. Together, the Portfolio Securities and the Cash Component constitute the ‘‘Redemption Payment.’’ The Redemption Payment may consist entirely of cash at the discretion of the Fund. Each business day prior to the opening of trading, the Fund will publish the specific securities and designated amount of cash included in that day’s basket for the Fund through the National Securities Clearing Corporation (‘‘NSCC’’) or other method of public dissemination. The Fund reserves the right to accept or pay out a basket of securities or cash that differs from the published basket. The prices at which creations and redemptions occur are based on the next calculation of NAV after an order is received in proper form. Creations and redemptions must be made by an Authorized Participant or through a firm that is either a member of the NSCC or a Depository Trust Company participant, and in each case, must have executed an agreement with the Distributor with respect to creations and redemptions of Creation Unit Aggregations. Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings disclosure policies, distributions, and taxes is included in the Registration Statement. All terms relating to the Fund that are referred to, but not defined in, this proposed rule change are defined in the Registration Statement. Availability of Information The Fund’s Web site (http:// www.wisdomtree.com), which will be publicly available prior to the public offering of Shares, will include a form of the Prospectus for the Fund that may be downloaded. The Web site will include additional quantitative information updated on a daily basis, including, for the Fund: (1) The prior E:\FR\FM\10MYN1.SGM 10MYN1 27132 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices jlentini on DSKJ8SOYB1PROD with NOTICES business day’s reported NAV, mid-point of the bid/ask spread at the time of calculation of such NAV (‘‘Bid/Ask Price’’),27 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 28 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’’) 29 held by the Fund and the Subsidiary that will form the basis for the Fund’s calculation of NAV at the end of the business day.30 The Web site and information will be publicly available at no charge. On a daily basis, the Adviser will disclose for each portfolio security or other financial instrument of the Fund the following information: Ticker symbol (if applicable), name or description of security or financial instrument; number of shares or dollar value of financial instruments held in the portfolio; and percentage weighting of the security or financial instrument in the portfolio. In addition, for the Fund, an estimated value, defined in NYSE Arca Equities Rule 8.600 as the ‘‘Portfolio Indicative Value,’’ that reflects an estimated intraday value of the Fund’s portfolio, will be disseminated. The Portfolio Indicative Value will be based upon the current value for the components of the Disclosed Portfolio and will be updated and disseminated by one or more major market data vendors at least every 15 seconds during 27 The Bid/Ask Price of the Fund will be determined using the midpoint of the highest bid and the lowest offer on the Exchange as of the time of calculation of the Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Fund and/or its service providers. 28 The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern time. 29 The Exchange notes that NYSE Arca Equities Rule 8.600(d)(2)(B)(ii) provides that the Reporting Authority that provides the Disclosed Portfolio must implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of the portfolio. 30 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 18:02 May 09, 2011 Jkt 223001 the Core Trading Session on the Exchange. The dissemination of the Portfolio Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and to provide a close estimate of that value throughout the trading day. Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), the Fund’s Shareholder Reports, and its Form N–CSR and Form N–SAR, filed twice a year. The Trust’s SAI and Shareholder Reports will be available free upon request from the Trust, and those documents and the Form N–CSR and Form N–SAR may be viewed onscreen or downloaded from the Commission’s Web site at http:// www.sec.gov. Information regarding market price and trading 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. Information regarding 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 (‘‘CTA’’) high-speed line. Initial and Continued Listing The Shares will be subject to NYSE Arca Equities Rule 8.600(d), which sets forth the initial and continued listing criteria applicable to Managed Fund Shares. The Exchange represents that, for initial and/or continued listing, the Fund must be in compliance with Rule 10A–3 under the Exchange Act,31 as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per share for the Fund will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. Shares of the Fund will be halted if the ‘‘circuit breaker’’ parameters in NYSE Arca Equities Rule 7.12 are reached. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make 31 See PO 00000 17 CFR 240.10A–3. Frm 00132 Fmt 4703 Sfmt 4703 trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the 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 NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern time in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. Surveillance The Exchange intends to utilize its existing surveillance procedures applicable to derivative products (which includes Managed Fund Shares) to monitor trading in the Shares. The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable Federal securities laws. The Exchange’s current trading surveillance focuses on detecting securities trading outside their normal patterns. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. The Exchange may obtain information via the Intermarket Surveillance Group (‘‘ISG’’) from other exchanges who are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.32 32 For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all of the components of the Disclosed Portfolio for the Fund may trade on exchanges that are members of ISG. E:\FR\FM\10MYN1.SGM 10MYN1 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. jlentini on DSKJ8SOYB1PROD with 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. 2. Statutory Basis The basis under the Exchange Act for this proposed rule change is the requirement under Section 6(b)(5) 33 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 is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.600. The Exchange has in place surveillance procedures that are 33 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 18:02 May 09, 2011 Jkt 223001 adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable Federal securities laws. The Exchange may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. According to the Registration Statement, the Fund currently expects that it will have at least 70% of its assets invested in investment grade securities, and no more than 30% of its assets invested in non-investment grade securities. The Fund will not invest more than 35% of its net assets in Fixed Income Securities of issuers in emerging markets. The Fund will invest only in corporate bonds that the Adviser or Sub-Adviser deems to be sufficiently liquid, and, 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. The U.S. and non-U.S. inflation linked bond markets, the corporate bond market, and emerging market debt markets in which the Fund may invest are characterized by substantial amounts outstanding, substantial liquidity, and price transparency. 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. Such investments also will not be used to enhance leverage. The Fund will not invest in any non-U.S. equity securities (other than shares of the Subsidiary). The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding the Fund and the Shares, thereby promoting market transparency. The Fund’s portfolio holdings will be disclosed on its Web site daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. Moreover, the Portfolio Indicative Value will be disseminated by one or more major market data vendors at least every 15 seconds during the Exchange’s Core Trading Session. On each business day, before commencement of trading in Shares in PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 27133 the Core Trading Session on the Exchange, the Fund will disclose on its Web site the Disclosed Portfolio that will form the basis for the Fund’s calculation of NAV at the end of the business day. Information regarding market price and trading 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, and quotation and last-sale information will be available via the CTA high-speed line. The Web site for the Fund will include a form of the Prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. Moreover, prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last-sale information for the Shares. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of actively managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last-sale information for the Shares. 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 E:\FR\FM\10MYN1.SGM 10MYN1 27134 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices 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 (i) as the Commission may designate up to 90 days of such date 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. The Exchange has requested accelerated approval of this proposed rule change prior to the 30th day after the date of publication of notice in the Federal Register. The Commission is considering granting accelerated approval of the proposed rule change at the end of a 21-day comment period. post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for 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–2011–21 and should be submitted on or before May 31, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Elizabeth M. Murphy, Secretary. [FR Doc. 2011–11327 Filed 5–9–11; 8:45 am] Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–NYSEArca–2011–21 on the subject line. jlentini on DSKJ8SOYB1PROD with NOTICES 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: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a Two-Sided Order for NOM Market Makers Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2011–21. 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 VerDate Mar<15>2010 18:02 May 09, 2011 Jkt 223001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64406; File No. SR– NASDAQ–2011–065] May 4, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on May 3, 2011, The NASDAQ Stock Market LLC (‘‘Exchange’’ or ‘‘NASDAQ’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. 34 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 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 NASDAQ is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposal for the NASDAQ Options Market (‘‘NOM’’) to amend Chapter VI, Trading Systems, Section 1, Definitions, to adopt a ‘‘Onecancels-the-other’’ order type, as described further below. This change is scheduled to be implemented on NOM on or about August 1, 2011; the Exchange will announce the implementation schedule by Options Trader Alert, once the rollout schedule is finalized. The text of the proposed rule change is available at nasdaq.cchwallstreet.com, at NASDAQ’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASDAQ included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NASDAQ has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to introduce a new order type to assist Market Makers with their market making requirements under NOM rules. Currently, on NOM, an Options Market Maker is a Participant 3 registered with NASDAQ as a Market Maker.4 Market Makers on NOM have certain obligations such as maintaining two-sided markets and participating in transactions that are ‘‘reasonably calculated to contribute to the 3 The term ‘‘Options Participant’’ or ‘‘Participant’’ means a firm or organization that is registered with the Exchange pursuant to Chapter II of the NOM Rules for purposes of participating in options trading on NOM as a ‘‘Nasdaq Options Order Entry Firm’’ or ‘‘Nasdaq Options Market Maker.’’ 4 See NOM Rules, Chapter VII, Section 2. E:\FR\FM\10MYN1.SGM 10MYN1

Agencies

[Federal Register Volume 76, Number 90 (Tuesday, May 10, 2011)]
[Notices]
[Pages 27127-27134]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11327]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64411; File No. SR-NYSEArca-2011-21]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade the WisdomTree Global Real 
Return Fund

May 5, 2011.
    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 April 20, 2011, NYSE Arca, Inc. (``Exchange'' 
or ``NYSE Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
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 (``Shares'') of 
the following series of the WisdomTree Trust (``Trust'') under NYSE 
Arca Equities Rule 8.600: WisdomTree Global Real Return Fund 
(``Fund''). The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and http://www.nyse.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund 
under NYSE Arca Equities Rule 8.600,\3\ which governs the listing and 
trading of ``Managed Fund Shares,'' on the Exchange.\4\ The Fund will 
be an actively

[[Page 27128]]

managed exchange-traded fund (``ETF''). The Shares will be offered by 
the Trust, which was established as a Delaware statutory trust on 
December 15, 2005. The Fund is registered with the Commission as an 
investment company.\5\ The Fund was formerly known as the ``WisdomTree 
Real Return Fund.'' The Commission approved listing and trading on the 
Exchange of the WisdomTree Real Return Fund pursuant to Section 
19(b)(2) of the Exchange Act in March 2010.\6\ The Fund Shares have not 
yet been listed and have not commenced trading, and the Fund seeks to 
make certain changes to its investment strategy that are not reflected 
in the March 12, 2010 Order. The Exchange seeks to propose the listing 
and trading of Shares of the Fund based on this new investment 
strategy, as described herein.
---------------------------------------------------------------------------

    \3\ NYSE Arca Equities Rule 8.600(c)(1) provides that a Managed 
Fund Share is a security that represents an interest in an 
investment company registered under the Investment Company Act of 
1940 (15 U.S.C. 80a) (``1940 Act'') organized as an open-end 
investment company or similar entity that invests in a portfolio of 
securities selected by its investment adviser consistent with its 
investment objectives and policies. In contrast, an open-end 
investment company that issues Investment Company Units, listed and 
traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), 
seeks to provide investment results that correspond generally to the 
price and yield performance of a specific foreign or domestic stock 
index, fixed income securities index, or combination thereof.
    \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, or trading 
on the Exchange pursuant to unlisted trading privileges (``UTP''), 
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 Currency Fund); 
60981 (November 10, 2009), 74 FR 59594 (November 18, 2009) (SR-
NYSEArca-2009-79) (order approving listing of five fixed income 
funds of the PIMCO ETF Trust); 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); 63598 (December 22, 2010), 75 FR 82106 (December 29, 
2010) (SR-NYSEArca-2010-98) (order approving listing and trading of 
WisdomTree Managed Futures Strategy Fund); 63919 (February 16, 
2011), 76 FR 10073 (February 23, 2011) (SR-NYSEArca-2010-116) (order 
approving listing and trading of WisdomTree Asia Local Debt Fund).
    \5\ See Post Effective Amendment No. 43 to the Registration 
Statement on Form N-1A for the Trust filed with the Securities and 
Exchange Commission on February 4, 2011 (File Nos. 333-132380 and 
811-21864) (``Registration Statement''). The descriptions of the 
Fund and the Shares contained herein are based on information in the 
Registration Statement.
    \6\ See Securities Exchange Act Release No. 61697 (March 12, 
2010), 75 FR 13616 (March 22, 2010) (SR-NYSEArca-2010-04) (``March 
12, 2010 Order'').
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Description of the Shares and the Fund
    WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'') 
is the investment adviser to the Fund (``Adviser'').\7\ WisdomTree 
Asset Management is not affiliated with any broker-dealer. Mellon 
Capital Management Corporation (``Sub-Adviser'') serves as the sub-
adviser for the Fund.\8\ The Bank of New York Mellon is the 
administrator, custodian, and transfer agent for the Fund. ALPS 
Distributors, Inc. serves as the distributor (``Distributor'') for the 
Fund.\9\
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    \7\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
    \8\ 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.
    \9\ The Commission has issued an order granting certain 
exemptive relief to the Trust under the 1940 Act. See Investment 
Company Act Release No. 28471 (October 27, 2008) (File No. 812-
13458). In compliance with Commentary .04 to NYSE Arca Equities Rule 
8.600, 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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    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.\10\ 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 non-public 
information regarding the open-end fund's portfolio. 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. 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 implement a 
fire wall with respect to such broker-dealer regarding access to 
information concerning the composition and/or changes to a portfolio.
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    \10\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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WisdomTree Global Real Return Fund
    According to the Registration Statement, the Fund seeks total 
returns that exceed the rate of inflation over long-term investment 
horizons. To achieve its objective, the Fund will invest in Fixed 
Income Securities (defined below) and other instruments designed to 
provide protection against inflation. The Fund will be actively managed 
and will have targeted exposure to commodities and commodity 
strategies. Using this approach, the Fund will seek to provide 
investors with both inflation protection and income.
Fixed Income Securities
    The Fund intends to invest at least 70% of its net assets in Fixed 
Income Securities. For these purposes, Fixed Income Securities include 
bonds, notes, or other debt obligations, such as government or 
corporate bonds, denominated in U.S. dollars or non-U.S. currencies. 
The Fund will invest in Fixed Income Securities tied to U.S. inflation 
rates, such as U.S. Treasury Inflation Protected Securities 
(``TIPS'').\11\ The Fund also will invest in inflation-linked Fixed 
Income Securities tied to non-U.S. inflation rates.\12\ The Fund's 
investments outside the United States will focus on inflation-linked 
securities from countries that are leading exporters of global 
commodities, such as Australia, Brazil, Canada, Chile, and South 
Africa. The Fund will not invest more than 35% of its net assets in 
Fixed Income Securities of issuers in emerging markets.\13\ The Fund 
may invest in

[[Page 27129]]

Fixed Income Securities that are not linked to inflation, such as U.S. 
or non-U.S. government bonds, as well as Fixed Income Securities that 
pay variable or floating rates.
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    \11\ According to the U.S. Treasury Web site, as of March 17, 
2011, the market for TIPS is the largest inflation indexed 
securities market in the world with over $550 billion of TIPS 
outstanding. (Source: United States Department of the Treasury, 
Overview of Treasury Inflation-Indexed Securities, http://www.treasury.gov/resource-center/fin-mkts/Pages/tips.aspx). The 
Adviser represents that this market is highly liquid and 
transparent.
    \12\ As of December 31, 2010, the total market capitalization of 
inflation-linked bonds in the Barclays Capital World Inflation 
Linked Index, a leading index of inflation-linked bonds in developed 
markets outside the United States, was approximately $1 trillion. As 
of December 31, 2010, the total market capitalization of inflation-
linked bonds in the Barclays Capital Emerging Markets Government 
Inflation Linked Bond Index, a leading index of inflation-linked 
debt issued by emerging market governments, was approximately $408 
billion. The Adviser represents that inflation-linked bonds outside 
the United States are issued in large par size (i.e., $200 million 
or more) and tend to be liquid. 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.
    \13\ According to the Adviser, while there is no universally 
accepted definition of what constitutes an ``emerging market,'' in 
general, emerging market countries are characterized by developing 
commercial and financial infrastructure with significant potential 
for economic growth and increased capital market participation by 
foreign investors. The Adviser and Sub-Adviser look at a variety of 
commonly used factors when determining whether a country is an 
``emerging'' market. In general, the Adviser and Sub-Adviser 
consider a country to be an emerging market if:
    (1) It is either (a) classified by the World Bank in the lower 
middle or upper middle income designation for one of the past 3 
years (i.e., per capita gross national product of less than U.S. 
$9,385), or (b) classified by the World Bank as high income in each 
of the last three years, but with a currency that has been primarily 
traded on a non-delivered basis by offshore investors (e.g., Korea 
and Taiwan); and
    (2) The country's debt market is considered relatively 
accessible by foreign investors in terms of capital flow and 
settlement considerations; and
    (3) The country has issued the equivalent of $5 billion in local 
currency sovereign debt. The criteria used to evaluate whether a 
country is an ``emerging market'' will change from time to time 
based on economic and other events.
    The category of ``emerging market bonds'' includes both U.S. 
dollar-denominated debt and non-U.S. or ``local'' currency debt. The 
global market for local currency debt is larger and more actively 
traded than the global market for dollar-denominated debt. The total 
dollar amount of emerging market debt instruments traded through 
September 30, 2010 was $4.903 trillion. Turnover in local currency 
debt instruments during the same period was $3.44 trillion and 
accounted for approximately 70% of the total turnover in emerging 
market debt instruments. For calendar year 2009, the total dollar 
amount of emerging market debt instruments traded was $4.445 
trillion. Turnover in local currency debt instruments in 2009 was 
$2.870 trillion and accounted for approximately 65% of the total 
turnover in emerging market debt instruments. (Source: Emerging 
Markets Traders Association Press Release(s) dated December 8, 2010, 
August 12, 2010, May 20, 2010, and March 8, 2010). As of December 
31, 2010, the total market capitalization of emerging market local 
currency sovereign debt in the J.P. Morgan Government Bonds Index--
Emerging Markets Global (``GBI-EM Global'') was $791 billion. This 
is an increase from $625 billion at the end of September 2009. The 
GBI-EM Global is a widely followed index of regularly traded, 
liquid, fixed-rate domestic currency government bonds. As of 
December 31, 2010, the market capitalization of emerging market 
dollar-denominated bonds in the J.P. Morgan Emerging Markets Bond 
Index (``EMBI'') was approximately $370 billion. This is up from 
$326 billion at the end of September 2009. The EMBI is a widely 
followed index of U.S. dollar denominated debt instruments issued by 
emerging market sovereign and quasi-sovereign entities. (Source: 
J.P. Morgan as of December 31, 2010 and September 30, 2009). The 
Adviser represents that sovereign debt of many emerging market 
countries is issued in large par size and tends to be liquid. 
Locally denominated debt issued by supra-national entities, such as 
the European Investment Bank or the International Bank for 
Reconstruction and Development, is also actively traded. Intra-day, 
executable price quotations on emerging market debt instruments, 
including all instruments described above, 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.
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    The Fund expects that it will have at least 70% of its assets 
invested in investment grade securities, and no more than 30% of its 
assets invested in non-investment grade securities. Because the debt 
ratings of issuers will change from time to time, the exact percentage 
of the Fund's investments in investment grade and non-investment grade 
Fixed Income Securities will change from time to time in response to 
economic events and changes to the credit ratings of such issuers.\14\ 
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 10% of its assets in 
securities rated BB 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.
---------------------------------------------------------------------------

    \14\ As of December 31, 2010, government debt of the United 
States, Australia, Brazil, Canada, Chile, and South Africa was rated 
investment grade by S&P and Fitch. As noted, the Fund intends to 
focus its investment outside the United States in commodity-
producing countries such as Australia, Brazil, Canada, Chile, and 
South Africa.
---------------------------------------------------------------------------

    While the Fund intends to focus its investments in Fixed Income 
Securities on bonds andother obligations of U.S. and non-U.S. 
governments and agencies, the Fund may invest up to 20% of its net 
assets in corporate bonds. The Fund will invest only in corporate bonds 
that the Adviser or Sub-Adviser deems to be sufficiently liquid.\15\ 
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. Economic and other conditions 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), and (ii) such investment is deemed by the Adviser or Sub-
Adviser to be in the best interest of the Fund.
---------------------------------------------------------------------------

    \15\ The Adviser represents that the size and liquidity of the 
market for corporate bonds, including corporate bonds of emerging 
market issuers, generally, has been increasing in recent years. The 
aggregate dollar amount of emerging market corporate bonds traded 
through the first three quarters of 2010 ($563 billion) exceeded the 
amount traded for the entire calendar year in 2009 ($514 billion). 
The $514 billion traded in 2009 represented a substantial increase 
over the amount traded in 2008 ($380 billion). Turnover in emerging 
market corporate debt has also increased significantly. Turnover in 
emerging market corporate debt through the first three quarters of 
2010 was approximately 11.5% of the overall volume of emerging 
market debt of $4.903 trillion for the same period. This is similar 
to calendar year 2009 where 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(s), 
December 8, 2010, August 12, 2010, May 20, 2010, and March 8, 2010.)
---------------------------------------------------------------------------

    The Fund may invest in securities with effective or final 
maturities of any length. The Fund will seek to keep the average 
effective duration of its portfolio between 2 and 8 years. Effective 
duration is an indication of an investment's interest rate risk or how 
sensitive an investment or a fund is to changes in interest rates. 
Generally, a fund or instrument with a longer effective duration is 
more sensitive to interest rate fluctuations, and therefore more 
volatile, than a fund with a shorter effective duration. The Fund's 
actual portfolio duration may be longer or shorter depending on market 
conditions.
    The Fund intends to invest in 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).\16\ Although the Fund intends to invest in a variety of 
securities and instruments, the Fund will be considered non-
diversified, which means that it may invest more of its assets in the 
securities of a smaller

[[Page 27130]]

number of issuers than if it were a diversified Fund.\17\
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    \16\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
    \17\ A ``non-diversified company,'' as defined in Section 
5(b)(2) of the 1940 Act, means any management company other than a 
diversified company (as defined in Section 5(b)(1) of the 1940 Act).
---------------------------------------------------------------------------

    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.\18\ 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 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.
---------------------------------------------------------------------------

    \18\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    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 Fund, 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 Fund. 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. The Fund does not intend to invest 
in any unrated Money Market Securities.
Derivative Instruments and Other Investments
    The Fund may use derivative instruments as part of its investment 
strategies. 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. For example, the Fund may engage 
in swap transactions that provide exposure to inflation rates, 
inflation-linked bonds, inflation-sensitive indices, or interest 
rates.\19\ The Fund also may buy or sell listed futures contracts on 
U.S. Treasury securities, non-U.S. government securities, and major 
non-U.S. currencies. The Fund's use of derivative instruments will be 
collateralized or otherwise backed by investments in short-term, high-
quality U.S. money market securities.
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    \19\ An inflation-linked swap is an agreement between two 
parties to exchange payments at a future date based on the 
difference between a fixed payment and a payment linked to an 
inflation rate or value at a future date. A typical interest rate 
swap involves the exchange of a floating interest rate payment for a 
fixed interest payment.
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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 and forward 
contracts, swap contracts, the purchase of securities on a when-issued 
or delayed delivery basis, or reverse repurchase agreements, the Fund, 
in accordance with applicable Federal securities laws, rules, and 
interpretations thereof, will ``set aside'' liquid assets, or engage in 
other measures to ``cover'' open positions with respect to such 
transactions.\20\
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    \20\ See 15 U.S.C. 80a-18. See also Investment Company Act 
Release No. 10666 (April 18, 1979), 44 FR 25128 (April 27, 1979); 
Dreyfus Strategic Investing, Commission No-Action Letter (June 22, 
1987); Merrill Lynch Asset Management, L.P., Commission No-Action 
Letter (July 2, 1996).
---------------------------------------------------------------------------

    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.\21\
---------------------------------------------------------------------------

    \21\ The Fund and the Subsidiary (as defined herein) will invest 
only in currencies, and instruments that provide exposure to such 
currencies, that have significant foreign exchange turnover and are 
included in the Bank for International Settlements Triennial Central 
Bank Survey, December 2007 (``BIS Survey''). Specifically, the Fund 
and Subsidiary may invest in currencies, and instruments that 
provide exposure to such currencies, selected from the top 40 
currencies (as measured by percentage share of average daily 
turnover for the applicable month and year) included in the BIS 
Survey.
---------------------------------------------------------------------------

    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 15% 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.\22\
---------------------------------------------------------------------------

    \22\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14617 (March 18, 2008), footnote 34. See also Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). A fund's portfolio security 
is illiquid if it cannot be disposed of in the ordinary course of 
business within seven days at approximately the value ascribed to it 
by the fund. See Investment Company Act Release No. 14983 (March 12, 
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 
under the 1940 Act); Investment Company Act Release No. 17452 (April 
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under 
the Securities Act of 1933).
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Investments in the WisdomTree Subsidiary and Commodity Strategies
    The Fund intends to have targeted exposure to commodities across a 
number of sectors, such as energy, precious metals, and agriculture. 
The Fund will seek to gain exposure to commodity markets through 
investments in a subsidiary organized in the Cayman Islands 
(``Subsidiary''). The Subsidiary is wholly-owned and controlled by the 
Fund, and its investments will be consolidated into the Fund's 
financial statements. The Fund's and Subsidiary's investments will be 
disclosed on the Fund's Web site

[[Page 27131]]

on a daily basis. The Fund's investment in the Subsidiary may not 
exceed 25% of the Fund's total assets at the end of each fiscal 
quarter. The Subsidiary's shares will be offered only to the Fund, and 
the Fund will not sell shares of the Subsidiary to other investors. The 
Fund will not invest in any non-U.S. equity securities (other than 
shares of the Subsidiary).
    The Fund's investment in the Subsidiary is designed to help the 
Fund achieve exposure to commodity returns in a manner consistent with 
the Federal tax requirements applicable to the Fund and other regulated 
investment companies. The Subsidiary will comply with the 1940 Act and 
will have essentially the same compliance policies and procedures as 
the Fund, except that, unlike the Fund, the Subsidiary may invest 
without limitation in commodity-linked investments. The Subsidiary will 
otherwise operate in essentially the same manner as the Fund. The 
Fund's Registration Statement states that, since the Subsidiary's 
investments are consolidated into the Fund's, the Fund's combined 
holdings (including the investments in the Subsidiary) must comply with 
the 1940 Act.
    The Subsidiary will achieve exposure to commodities through 
investments in a combination of listed commodity futures, commodity 
index swaps, and structured notes that provide commodity returns. A 
listed commodity future is a financial instrument in which a party 
agrees to pay a fixed price for a designated commodity at a specified 
future date. Listed commodity futures contracts are traded at market 
prices on exchanges pursuant to terms common to all market 
participants.\23\ A swap agreement is an agreement between two parties 
to exchange cash flows or returns (or differences in return) on a 
reference instrument, such as commodity or commodity index, according 
to agreed upon terms.\24\ The Subsidiary also may invest in commodity-
linked notes.\25\
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    \23\ The Subsidiary's investments will be subject to applicable 
requirements of the Commodity Exchange Act (7 U.S.C. 1 et seq.) and 
rules thereunder, and to rules of applicable U.S. futures exchanges.
    The Subsidiary's investments in commodity futures contracts will 
be limited by the application of position limits imposed by the 
Commodity Futures Trading Commission and U.S. futures exchanges 
intended to prevent undue influence on prices by a single trader or 
group of affiliated traders. The Adviser has represented that the 
Subsidiary intends to invest only in listed futures contracts that 
are heavily traded and are based on some of the world's most liquid 
and actively-traded commodities. The Subsidiary intends to invest in 
or have exposure to the following listed futures contracts: Cocoa; 
coffee; corn; cotton; light crude oil; gold; heating oil; high grade 
copper; lean hogs; live cattle; natural gas; silver; soybeans; 
sugar; unleaded gas; and wheat. As of December 31, 2010, the three 
month Average Daily Dollar Volume (``ADDV'') of each of these 
contracts was: Cocoa (ADDV $224,966,443); coffee (ADDV 
$763,835,166); cotton (ADDV $902,108,625); corn (ADDV 
$4.308,052,565); crude oil (ADDV $29,502,020,531); gold (ADDV 
$13,311,058,209); heating oil (ADDV $4,890,080,900); high grade 
copper (ADDV $106,356,378); lean hogs (ADDV $517,336,897); live 
cattle (ADDV $751,594,460); natural gas (ADDV $4,981,670,245); 
silver (ADDV $3,500,016,194); soybeans (ADDV $4,397,418.179); sugar 
(ADDV $1,808,678,695); unleaded gas (ADDV $3,950,780,447); and wheat 
(ADDV $1,675,560,847).
    \24\ The Subsidiary intends to enter into over-the-counter swap 
transactions only with respect to transactions based on the 
commodities described herein or on major commodity indexes or 
indicators, such as the S&P GSCI Total Return Index, Dow Jones-UBS 
Commodity Returns Index or the AFT Commodity Trends Indicator (each, 
an ``Index''). Each Index is widely followed and serves as the basis 
for a variety of investment products (such as swap contracts). 
Intra-day, executable price quotations on such Indexes and 
commodities 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.
    \25\ Commodity-linked notes are over-the-counter debt 
instruments, typically issued by a bank or broker-dealer, that are 
designed to provide cash flows linked to the value of a reference 
asset. They provide exposure, which may include long and/or short 
exposure, to the investment returns of the reference asset 
underlying the note. The performance of these notes is determined by 
the price movement of the reference asset underlying the note. The 
Subsidiary's investment in commodity-linked notes will be limited to 
notes providing exposure to the commodities described herein or any 
commodity index. As noted, there is a liquid and active market for 
the commodities described herein. Intra-day and end-of-day prices 
are readily available through Bloomberg, other major market data 
providers and broker-dealers for the listed futures contracts and 
commodities described herein. As a result, information necessary to 
evaluate the value of any swap or commodity-linked note purchased by 
the Subsidiary will be readily available to market participants.
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The Shares
    According to the Registration Statement, the Fund issues and 
redeems Shares on a continuous basis at net asset value (``NAV'') \26\ 
only in large blocks of Shares, typically 100,000 Shares or more 
(``Creation Unit Aggregations''), in transactions with Authorized 
Participants. Only institutional investors who have entered into an 
Authorized Participant agreement purchase or redeem Creation Unit 
Aggregations. The consideration for purchase of Creation Unit 
Aggregations of the Fund generally consists of the in-kind deposit of a 
designated portfolio of Fixed Income Securities held by the Fund 
(``Deposit Securities'') and an amount of cash (``Cash Component''). 
Together, the Deposit Securities and the Cash Component constitute the 
``Fund Deposit,'' which represents the minimum initial and subsequent 
investment amount for a Creation Unit Aggregation of the Fund. Shares 
may be redeemed from the Fund only in Creation Unit Aggregations. Upon 
delivery and settlement of the Shares upon redemption, the Fund will 
deliver to the redeeming Authorized Participant a designated basket of 
fixed income securities (``Portfolio Securities'') and Cash Component. 
Together, the Portfolio Securities and the Cash Component constitute 
the ``Redemption Payment.'' The Redemption Payment may consist entirely 
of cash at the discretion of the Fund.
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    \26\ The NAV of the Fund's Shares generally will be calculated 
once daily Monday through Friday as of the close of regular trading 
on the New York Stock Exchange, generally 4:00 p.m. Eastern time 
(``NAV Calculation Time''). NAV per Share will be 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.
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    Each business day prior to the opening of trading, the Fund will 
publish the specific securities and designated amount of cash included 
in that day's basket for the Fund through the National Securities 
Clearing Corporation (``NSCC'') or other method of public 
dissemination. The Fund reserves the right to accept or pay out a 
basket of securities or cash that differs from the published basket. 
The prices at which creations and redemptions occur are based on the 
next calculation of NAV after an order is received in proper form.
    Creations and redemptions must be made by an Authorized Participant 
or through a firm that is either a member of the NSCC or a Depository 
Trust Company participant, and in each case, must have executed an 
agreement with the Distributor with respect to creations and 
redemptions of Creation Unit Aggregations.
    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, 
distributions, and taxes is included in the Registration Statement. All 
terms relating to the Fund that are referred to, but not defined in, 
this proposed rule change are defined in the Registration Statement.
Availability of Information
    The Fund's Web site (http://www.wisdomtree.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the Prospectus for the Fund that may be downloaded. The Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund: (1) The prior

[[Page 27132]]

business day's reported NAV, mid-point of the bid/ask spread at the 
time of calculation of such NAV (``Bid/Ask Price''),\27\ 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 \28\ 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'') \29\ held by the Fund and the Subsidiary that will form 
the basis for the Fund's calculation of NAV at the end of the business 
day.\30\ The Web site and information will be publicly available at no 
charge.
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    \27\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and/or its service 
providers.
    \28\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern 
time.
    \29\ The Exchange notes that NYSE Arca Equities Rule 
8.600(d)(2)(B)(ii) provides that the Reporting Authority that 
provides the Disclosed Portfolio must implement and maintain, or be 
subject to, procedures designed to prevent the use and dissemination 
of material non-public information regarding the actual components 
of the portfolio.
    \30\ 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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    On a daily basis, the Adviser will disclose for each portfolio 
security or other financial instrument of the Fund the following 
information: Ticker symbol (if applicable), name or description of 
security or financial instrument; number of shares or dollar value of 
financial instruments held in the portfolio; and percentage weighting 
of the security or financial instrument in the portfolio.
    In addition, for the Fund, an estimated value, defined in NYSE Arca 
Equities Rule 8.600 as the ``Portfolio Indicative Value,'' that 
reflects an estimated intraday value of the Fund's portfolio, will be 
disseminated. The Portfolio Indicative Value will be based upon the 
current value for the components of the Disclosed Portfolio and will be 
updated and disseminated by one or more major market data vendors at 
least every 15 seconds during the Core Trading Session on the Exchange. 
The dissemination of the Portfolio Indicative Value, together with the 
Disclosed Portfolio, will allow investors to determine the value of the 
underlying portfolio of the Fund on a daily basis and to provide a 
close estimate of that value throughout the trading day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports will be available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at http://www.sec.gov. 
Information regarding market price and trading 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. 
Information regarding 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 (``CTA'') high-speed 
line.
Initial and Continued Listing
    The Shares will be subject to NYSE Arca Equities Rule 8.600(d), 
which sets forth the initial and continued listing criteria applicable 
to Managed Fund Shares. The Exchange represents that, for initial and/
or continued listing, the Fund must be in compliance with Rule 10A-3 
under the Exchange Act,\31\ as provided by NYSE Arca Equities Rule 5.3. 
A minimum of 100,000 Shares will be outstanding at the commencement of 
trading on the Exchange. The Exchange will obtain a representation from 
the issuer of the Shares that the NAV per share for the Fund will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.
---------------------------------------------------------------------------

    \31\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Shares of the Fund will be halted if 
the ``circuit breaker'' parameters in NYSE Arca Equities Rule 7.12 are 
reached. Trading may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities and/or the 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 NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which includes Managed 
Fund Shares) to monitor trading in the Shares. The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable Federal securities laws.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members of 
ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\32\
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    \32\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all of the components 
of the Disclosed Portfolio for the Fund may trade on exchanges that 
are members of ISG.

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[[Page 27133]]

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
Aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading the Shares; (3) the risks involved in trading 
the Shares during the Opening and Late Trading Sessions when an updated 
Portfolio Indicative Value will not be calculated or publicly 
disseminated; (4) how information regarding the Portfolio Indicative 
Value is disseminated; (5) the requirement that ETP Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated 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) \33\ 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.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable Federal securities laws. The Exchange may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. According to the Registration Statement, the Fund currently 
expects that it will have at least 70% of its assets invested in 
investment grade securities, and no more than 30% of its assets 
invested in non-investment grade securities. The Fund will not invest 
more than 35% of its net assets in Fixed Income Securities of issuers 
in emerging markets. The Fund will invest only in corporate bonds that 
the Adviser or Sub-Adviser deems to be sufficiently liquid, and, 
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. The U.S. and non-U.S. inflation linked bond 
markets, the corporate bond market, and emerging market debt markets in 
which the Fund may invest are characterized by substantial amounts 
outstanding, substantial liquidity, and price transparency. 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. Such investments also 
will not be used to enhance leverage. The Fund will not invest in any 
non-U.S. equity securities (other than shares of the Subsidiary).
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. The Fund's portfolio holdings 
will be disclosed on its Web site daily after the close of trading on 
the Exchange and prior to the opening of trading on the Exchange the 
following day. Moreover, the Portfolio Indicative Value will be 
disseminated by one or more major market data vendors at least every 15 
seconds during the Exchange's Core Trading Session. On each business 
day, before commencement of trading in Shares in the Core Trading 
Session on the Exchange, the Fund will disclose on its Web site the 
Disclosed Portfolio that will form the basis for the Fund's calculation 
of NAV at the end of the business day. Information regarding market 
price and trading 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, and quotation and last-sale 
information will be available via the CTA high-speed line. The Web site 
for the Fund will include a form of the Prospectus for the Fund and 
additional data relating to NAV and other applicable quantitative 
information. Moreover, prior to the commencement of trading, the 
Exchange will inform its ETP Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
Trading in Shares of the Fund will be halted if the circuit breaker 
parameters in NYSE Arca Equities Rule 7.12 have been reached or because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable, and trading in the Shares will 
be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the Portfolio Indicative 
Value, the Disclosed Portfolio, and quotation and last-sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation 
and last-sale information for the Shares.

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

[[Page 27134]]

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 (i) as the Commission may 
designate up to 90 days of such date 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.

The Exchange has requested accelerated approval of this proposed rule 
change prior to the 30th day after the date of publication of notice in 
the Federal Register. The Commission is considering granting 
accelerated approval of the proposed rule change at the end of a 21-day 
comment period.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NYSEArca-2011-21 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2011-21. 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for 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-2011-21 and should be submitted on or before May 31, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11327 Filed 5-9-11; 8:45 am]
BILLING CODE 8011-01-P