Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade the Shares of the WisdomTree Dreyfus Euro Debt Fund Under NYSE Arca Equities Rule 8.600, 34112-34118 [2011-14415]
Download as PDF
<![CDATA[
34112
Federal Register / Vol. 76, No. 112 / Friday, June 10, 2011 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has become effective upon filing
pursuant to Section 19(b)(3)(A) of the
Act 7 and Rule 19b–4(f)(4) 8 thereunder
because the proposed rule change
effects a change in an existing service of
a registered clearing agency that: (i)
Does not adversely affect the
safeguarding of securities or funds in
the custody or control of the clearing
agency or for which it is responsible;
and (ii) does not significantly affect the
respective rights or obligations of the
clearing agency or persons using the
service. At any time within 60 days of
the filing of the proposed rule change,
the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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 filings
also will be available for inspection and
copying at the principal office of FICC
and on FICC’s Web site at https://
dtcc.com/downloads/legal/rule_filings/
2011/ficc/2011-04.pdf. 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–FICC–
2011–04 and should be submitted on or
before July 1, 2011.
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:
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.9
Cathy H. Ahn,
Deputy Secretary .
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–FICC–2011–04 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–FICC–2011–04. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
[FR Doc. 2011–14388 Filed 6–9–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64608; File No. SR–
NYSEArca–2011–31]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To List and Trade the
Shares of the WisdomTree Dreyfus
Euro Debt Fund Under NYSE Arca
Equities Rule 8.600
June 6, 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 24,
2011, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I 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.
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
7 15
U.S.C. 78s(b)(3)(A).
8 17 CFR 240.19b–4(f)(4).
VerDate Mar<15>2010
14:33 Jun 09, 2011
1 15
Jkt 223001
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
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 fund of the WisdomTree Trust
(the ‘‘Trust’’) under NYSE Arca Equities
Rule 8.600 (‘‘Managed Fund Shares’’):
WisdomTree Dreyfus Euro Debt Fund.
The text of the proposed rule change is
available at the Exchange, the
Commission’s Public Reference Room,
and https://www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares of the WisdomTree
Dreyfus Euro Debt Fund (‘‘Fund’’) under
NYSE Arca Equities Rule 8.600, which
governs the listing and trading of
Managed Fund Shares on the
Exchange.3 The Shares will be offered
3 The Commission approved NYSE Arca Equities
Rule 8.600 and the listing and trading of certain
funds of the PowerShares Actively Managed Funds
Trust on the Exchange pursuant to Rule 8.600 in
Securities Exchange Act Release No. 57619 (April
4, 2008), 73 FR 19544 (April 10, 2008) (SR–
NYSEArca–2008–25). The Commission also
previously approved listing and trading on the
Exchange of a number of actively managed funds
under Rule 8.600. See, e.g., Securities Exchange Act
Release Nos. 57801 (May 8, 2008), 73 FR 27878
(May 14, 2008) (SR–NYSEArca–2008–31) (order
approving Exchange listing and trading of twelve
actively managed funds of the WisdomTree Trust);
58564 (September 17, 2008), 73 FR 55194
(September 24, 2008) (SR–NYSEArca–2008–86)
(order approving Exchange listing and trading of
WisdomTree Dreyfus Emerging Currency Fund);
62604 (July 30, 2010), 75 FR 47323 (August 5, 2010)
(SR–NYSEArca–2010–49) (order approving listing
and trading of WisdomTree Emerging Markets Local
Debt Fund); 62623 (August 2, 2010), 75 FR 47652
(August 6, 2010) (SR–NYSEArca–2010–51) (order
approving listing and trading of WisdomTree
Dreyfus Commodity Currency Fund); 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); and 63919 (February 16, 2011), 76
FR 10073 (February 23, 2011) (SR–NYSEArca–
E:\FR\FM\10JNN1.SGM
10JNN1
Federal Register / Vol. 76, No. 112 / Friday, June 10, 2011 / Notices
by the Trust, which was established as
a Delaware statutory trust on December
15, 2005. The Trust is registered with
the Commission as an investment
company and the Fund has filed a
registration statement on Form N–1A
(‘‘Registration Statement’’) with the
Commission. The Fund is currently
known as the ‘‘WisdomTree Dreyfus
Euro Fund’’ and is an actively managed
exchange-traded fund. The Commission
approved listing and trading on the
Exchange of the WisdomTree Dreyfus
Euro Fund pursuant to Section 19(b)(2)
of the Exchange Act on May 8, 2008
(‘‘May 2008 Order’’).4 On April 14, 2011,
the WisdomTree Dreyfus Euro Fund
filed a supplement to its Registration
Statement (the ‘‘Supplement’’) pursuant
to Rule 497 under the Securities Act of
1933.5 As stated in the Supplement, the
WisdomTree Dreyfus Euro Fund,
effective on or after June 27, 2011, will
change its investment objective and
strategy and will be renamed the
‘‘WisdomTree Dreyfus Euro Debt
Fund.’’ 6 The WisdomTree Dreyfus Euro
Fund’s new name, investment objective,
and investment strategies, which are not
reflected in the May 2008 Order, are
described below. Shareholders of the
WisdomTree Dreyfus Euro Fund who
wish to remain in the Fund do not need
to take any action. Shareholders who do
not wish to remain invested in the Fund
may sell their Shares at any time.
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
Description of the Shares and the Fund
WisdomTree Asset Management, Inc.
(‘‘WisdomTree Asset Management’’) is
the investment adviser (‘‘Adviser’’) to
the Fund.7 The Dreyfus Corporation
serves as sub-adviser for the Fund
(‘‘Sub-Adviser’’).8 The Bank of New York
Mellon is the administrator, custodian
and transfer agent for the Trust. ALPS
Distributors, Inc. serves as the
distributor for the Trust.9
2010–116) (order approving listing and trading of
WisdomTree Asia Local Debt Fund).
4 See Securities Exchange Act Release No. 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).
5 15 U.S.C. 77a et seq.
6 See Form 497, Supplement to Registration
Statement on Form N–1A for the Trust, dated April
14, 2011 (File Nos. 333–132380 and 811–21864).
The descriptions of the Fund and the Shares
contained herein are based, in part, on information
in the Supplement and the Registration Statement.
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
VerDate Mar<15>2010
14:33 Jun 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 nonpublic information
regarding the open-end fund’s portfolio.
Commentary .06 to Rule 8.600 is similar
to Commentary .03(a)(i) and (iii) to
NYSE Arca Equities Rule 5.2(j)(3);
however, Commentary .06 in connection
with the establishment of a ‘‘fire wall’’
between the investment adviser and the
broker-dealer reflects the applicable
open-end fund’s portfolio, not an
underlying benchmark index, as is the
case with index-based funds. The
Adviser is not affiliated with any
broker-dealer. The Sub-Adviser is
affiliated with multiple broker-dealers
Investment Company Act of 1940 (15 U.S.C. 80a–
1) (‘‘1940 Act’’). See Investment Company Act
Release No. 28171 (October 27, 2008) (File No. 812–
13458). In compliance with Commentary .05 to
NYSE Arca Equities Rule 8.600, which applies to
Managed Fund Shares based on an international or
global portfolio, the Trust’s application for
exemptive relief under the 1940 Act states that the
Fund will comply with the federal securities laws
in accepting securities for deposits and satisfying
redemptions with redemption securities, including
that the securities accepted for deposits and the
securities used to satisfy redemption requests are
sold in transactions that would be exempt from
registration under the Securities Act of 1933 (15
U.S.C. 77a).
10 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the 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 00083
Fmt 4703
Sfmt 4703
34113
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 addition, SubAdviser personnel who make decisions
regarding the Fund’s portfolio are
subject to procedures designed to
prevent the use and dissemination of
material nonpublic information
regarding the Fund’s portfolio. In the
event (a) the Adviser or the Sub-Adviser
becomes newly affiliated with a brokerdealer, or (b) any new adviser or subadviser becomes affiliated with a brokerdealer, they [sic] will implement a fire
wall with respect to such broker-dealer
regarding access to information
concerning the composition and/or
changes to the portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
WisdomTree Dreyfus Euro Debt Fund
As noted above, effective on or after
June 27, 2011, the WisdomTree Dreyfus
Euro Fund will change its investment
objective and investment strategies and
be renamed the ‘‘WisdomTree Dreyfus
Euro Debt Fund.’’ Upon implementation
of the change, the Fund’s new
investment objective will be to seek a
high level of total returns consisting of
both income and capital appreciation
and its investment strategies will be
changed as described below.11
Euro-Denominated Debt
Under normal circumstances, the
Fund will invest at least 80% of its net
assets in Fixed Income Securities
denominated in Euros.12 For purposes
of this proposed rule change, Fixed
Income Securities include bonds, notes
or other debt obligations, such as
government or corporate bonds,
denominated in Euros, including issues
denominated in Euros that are issued by
‘‘supranational issuers,’’ such as the
European Investment Bank,
International Bank for Reconstruction
and Development, and the International
Finance Corporation, or other regional
11 The Adviser represents that the Supplement
has been sent to existing Shareholders of the Fund
to notify them of the planned change. The
Supplement and additional information have been
posted on the Fund’s website at https://
www.wisdomtree.com.
12 The term ‘‘under normal market circumstances’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the fixed
income markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar
intervening circumstance.
E:\FR\FM\10JNN1.SGM
10JNN1
34114
Federal Register / Vol. 76, No. 112 / Friday, June 10, 2011 / Notices
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
development banks, as well as
development agencies supported by
other national governments. Under
normal circumstances, the Fund may
invest up to 20% of its assets in Fixed
Income Securities denominated in U.S.
dollars. The Fund may invest in Money
Market Securities and derivative and
other instruments, as described below.13
The Fund intends to focus its
investments on ‘‘Sovereign Debt.’’ For
these purposes, Sovereign Debt means
Fixed Income Securities issued by
governments, government agencies and
government-sponsored enterprises of
countries in the European Union (‘‘EU’’)
that are denominated in Euros.14 This
includes inflation-linked bonds
designed to provide protection against
increases in general inflation rates. The
Fund may invest up to 20% of its net
assets in corporate debt of companies
organized in EU countries or that have
significant economic ties to EU
countries. The Fund will invest only in
corporate bonds that the Adviser or SubAdviser deems to be sufficiently liquid.
Generally, a corporate bond must have
$200 million or more par amount
outstanding and significant par value
traded to be considered as an eligible
investment. 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), (ii) such investment is
consistent with the Fund’s goal of
providing exposure to a broad range of
Fixed Income Securities denominated in
Euros, and (iii) such investment is
deemed by the Adviser or Sub-Adviser
to be in the best interest of the Fund.
The Fund intends to provide broad
exposure to countries in the EU. As a
general matter, the Fund will invest a
higher percentage of its assets in
13 As of February 17, 2011, the amount of Eurodenominated debt outstanding exceeded US$19.2
trillion. Source: Deutsche Bundesbank, at https://
www.bundesbank.de/statistik/statistik_eszb_
neuesfenster_tabelle.php?stat=debt_
securities&lang=.en.
14 As of February 17, 2011, the amount of
sovereign Euro-denominated debt outstanding
exceeded US$8.02 trillion. Source: Deutsche
Bundesbank, at https://www.bundesbank.de/
statistik/statistik_eszb_neuesfenster_tabelle.php?
stat=debt_securities&lang=.en.
VerDate Mar<15>2010
14:33 Jun 09, 2011
Jkt 223001
countries with larger and more liquid
debt markets. The Fund’s exposure to
any single country generally will be
limited to 20% of the Fund’s assets. The
percentage of Fund assets invested in a
specific country or issuer will change
from time to time.
The universe of Euro-denominated
Fixed Income Securities currently
includes securities that are rated
‘‘investment grade’’ as well as ‘‘noninvestment grade.’’ As the Fund intends
to provide broad-based exposure to
Euro-denominated Fixed Income
Securities, the Fund will invest in both
investment-grade and non-investmentgrade securities. Securities rated
investment grade generally are
considered to be of higher credit quality
and subject to lower default risk.
Although securities rated below
investment grade may offer the potential
for higher yields, they generally are
subject to a higher potential risk of loss.
The Fund expects to have 75% or more
of its assets invested in investment
grade bonds, though this percentage
may change from time to time in
accordance with market conditions and
the debt ratings assigned to countries
and issuers.
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. 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 or Sub-Adviser will consider,
for example, current information about
the credit quality of the issuer and
whether or not the issuer of the security
has issued other rated securities.
The Fund attempts to limit interest
rate risk by maintaining an aggregate
portfolio duration of between two and
eight years under normal market
conditions. Aggregate portfolio duration
is important to investors as an
indication of the Fund’s sensitivity to
changes in interest rates. Funds with
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
higher durations generally are subject to
greater interest rate risk. An aggregate
portfolio duration of between two and
eight years generally would be
considered to be ‘‘intermediate.’’ The
Fund’s actual portfolio duration may be
longer or shorter depending upon
market conditions. The Fund may also
invest in short-term Money Market
Securities (as defined below)
denominated in the currencies of
countries in which the Fund invests.
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).15
The Fund intends to qualify each year
as a regulated investment company (a
‘‘RIC’’) under Subchapter M of the
Internal Revenue Code of 1986, as
amended.16 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
15 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).
16 26 U.S.C. 851.
E:\FR\FM\10JNN1.SGM
10JNN1
Federal Register / Vol. 76, No. 112 / Friday, June 10, 2011 / Notices
more than 30% of the weight of the
Fund’s portfolio and the five highest
weighted portfolio securities of the
Fund (other than U.S. government
securities and/or non-U.S. government
securities) will not in the aggregate
account for more than 65% of the
weight of the Fund’s portfolio. For these
purposes, the Fund may treat
repurchase agreements collateralized by
U.S. government securities or non-U.S.
government securities as U.S. or nonU.S. government securities, as
applicable.
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
Money Market Securities
Assets not invested in Fixed Income
Securities generally will be invested in
Money Market Securities. The Fund
intends to invest in Money Market
Securities in order to help manage cash
flows in and out of the Fund, such as
in connection with payment of
dividends or expenses, and to satisfy
margin requirements, to provide
collateral or to otherwise back
investments in derivative instruments.
For these purposes, Money Market
Securities include: short-term, highquality obligations issued or guaranteed
by the U.S. Treasury or the agencies or
instrumentalities of the U.S.
government; short-term, high-quality
securities issued or guaranteed by nonU.S. governments, agencies and
instrumentalities; repurchase
agreements backed by short-term U.S.
government securities or non-U.S.
government securities; money market
mutual funds; and deposits and other
obligations of U.S. and non-U.S. banks
and financial institutions. All Money
Market Securities acquired by the Fund
will be rated investment grade, except
that the Fund may invest in unrated
Money Market Securities that are
deemed by the Adviser or Sub-Adviser
to be of comparable quality to Money
Market Securities rated investment
grade. In determining whether a security
is of ‘‘comparable quality,’’ the Adviser
or Sub-Adviser will consider, for
example, current information about the
credit quality of the issuer and whether
or not the issuer of the security has
issued other rated securities.
Derivative Instruments and Other
Investments
The Fund may use derivative
instruments as part of its investment
strategies. Examples of derivative
instruments include listed futures
contracts,17 forward currency contracts,
17 The listed futures contracts in which the Fund
will invest may be listed on exchanges in the U.S.
or in London, Hong Kong or Singapore. Each of the
United Kingdom’s primary financial markets
regulator, the Financial Services Authority, Hong
VerDate Mar<15>2010
14:33 Jun 09, 2011
Jkt 223001
non-deliverable forward currency
contracts, currency and interest rate
swaps, currency options, options on
futures contracts, swap agreements and
credit-linked notes.18 The Fund’s use of
derivative instruments (other than
credit-linked notes) will be
collateralized or otherwise backed by
investments in short term, high-quality
U.S. Money Market Securities. Under
normal circumstances, the Fund will
invest no more than 20% of the value
of the Fund’s net assets in derivative
instruments. Such investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage.
With respect to certain kinds of
derivative transactions entered into by
the Fund that involve obligations to
make future payments to third parties,
including, but not limited to, futures,
forward contracts, swap contracts, the
purchase of securities on a when-issued
or delayed delivery basis, or reverse
repurchase agreements, the Fund, in
accordance with applicable federal
securities laws, rules, and
interpretations thereof, will ‘‘set aside’’
liquid assets to ‘‘cover’’ open positions
with respect to such transactions.19
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
Kong’s primary financial markets regulator, the
Securities and Futures Commission, and
Singapore’s primary financial markets regulator, the
Monetary Authority of Singapore, are signatories to
the International Organization of Securities
Commissions (‘‘IOSCO’’) Multilateral Memorandum
of Understanding (‘‘MMOU’’), which is a multi-party
information sharing arrangement among major
financial regulators. Both the Commission and the
Commodity Futures Trading Commission are
signatories to the IOSCO MMOU.
18 The Fund may invest in credit-linked notes. A
credit linked note is a type of structured note whose
value is linked to an underlying reference asset.
Credit linked notes typically provide periodic
payments of interest as well as payment of principal
upon maturity. The value of the periodic payments
and the principal amount payable upon maturity
are tied (positively or negatively) to a reference
asset such as an index, government bond, interest
rate or currency exchange rate. The ongoing
payments and principal upon maturity typically
will increase or decrease depending on increases or
decreases in the value of the reference asset. The
Fund’s investments in credit-linked notes will be
limited to notes providing exposure to Fixed
Income Securities denominated in Euros. The
Fund’s overall investment in credit-linked notes
will not exceed 25% of the Fund’s assets.
19 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 00085
Fmt 4703
Sfmt 4703
34115
contracts in order to ‘‘lock in’’ the
exchange rate between the currency it
will deliver and the currency it will
receive for the duration of the contract.
The Fund may enter into swap
agreements, including interest rate
swaps and currency swaps (e.g., Euro
vs. U.S. dollar), and may buy or sell put
and call options on foreign currencies,
either on exchanges or in the over-thecounter market. The Fund may enter
into repurchase agreements with
counterparties that are deemed to
present acceptable credit risks, and may
enter into reverse repurchase
agreements, which involve the sale of
securities held by the Fund subject to its
agreement to repurchase the securities
at an agreed upon date or upon demand
and at a price reflecting a market rate of
interest.
The Fund may invest in the securities
of other investment companies
(including money market funds and
exchange-traded funds (‘‘ETFs’’)). The
Fund may invest up to an aggregate
amount of 15% of its net assets in (a)
illiquid securities and (b) Rule 144A
securities. Illiquid securities include
securities subject to contractual or other
restrictions on resale and other
instruments that lack readily available
markets.20
The Fund will not invest in non-U.S.
equity securities.
The Shares
The Fund issues and redeems Shares
on a continuous basis at net asset value
(‘‘NAV’’) 21 only in large blocks of Shares
(‘‘Creation Units’’) in transactions with
authorized participants. Creation Units
20 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 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 ETF.
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).
21 The NAV of the Fund’s Shares generally is
calculated once daily Monday through Friday as of
the close of regular trading on the New York Stock
Exchange, generally 4:00 p.m. Eastern time (the
‘‘NAV Calculation Time’’). NAV per Share is
calculated by dividing the Fund’s net assets by the
number of Fund Shares outstanding. For more
information regarding the valuation of Fund
investments in calculating the Fund’s NAV, see the
Registration Statement.
E:\FR\FM\10JNN1.SGM
10JNN1
34116
Federal Register / Vol. 76, No. 112 / Friday, June 10, 2011 / Notices
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
generally will consist of 100,000 Shares,
though this may change from time to
time. Creation Units are not expected to
consist of less than 50,000 Shares. The
Fund generally will issue and redeem
Creation Units in exchange for a
portfolio of Fixed Income Securities
closely approximating the holdings of
the Fund and/or a designated amount of
cash in U.S. dollars. Once created,
Shares of the Fund will trade on the
secondary market in amounts less than
a Creation Unit. 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 and an amount of cash.
Together, such Fixed Income Securities
and amount of cash constitute the
‘‘Redemption Payment.’’ The
Redemption Payment may consist
entirely of cash at the discretion of the
Fund.
Additional information regarding the
Shares and the Fund, including
investment strategies, risks, creation and
redemption procedures, fees, portfolio
holdings disclosure policies,
distributions and taxes is included in
the Registration Statement.
Availability of Information
The Fund’s Web site (https://
www.wisdomtree.com), which will be
publicly available prior to the public
offering of Shares, will include a form
of the Prospectus for the Fund that may
be downloaded. The website will
include additional quantitative
information updated on a daily basis,
including, for the Fund: (1) The prior
business day’s reported NAV, mid-point
of the bid/ask spread at the time of
calculation of such NAV (the ‘‘Bid/Ask
Price’’),22 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 23 on the
Exchange, the Trust will disclose on its
website the identities and quantities of
the portfolio of securities and other
22 The Bid/Ask Price of the Fund is determined
using the midpoint of the highest bid and the
lowest offer on the Exchange as of the time of
calculation of such Fund’s NAV. The records
relating to Bid/Ask Prices will be retained by the
Fund and its service providers.
23 The Core Trading Session is 9:30 a.m. to 4 p.m.
Eastern time.
VerDate Mar<15>2010
14:33 Jun 09, 2011
Jkt 223001
assets (the ‘‘Disclosed Portfolio’’) held by
the Fund that will form the basis for the
Fund’s calculation of NAV at the end of
the business day.24 The Disclosed
Portfolio will include, as applicable, the
names, quantity, percentage weighting
and market value of Fixed Income
Securities, and other assets held by the
Fund and the characteristics of such
assets. The website and information will
be publicly available at no charge.
In addition, for the Fund, an
estimated value, defined in Rule 8.600
as the ‘‘Portfolio Indicative Value,’’ that
reflects an estimated intraday value of
the Fund’s portfolio, will be
disseminated. The Portfolio Indicative
Value will be based upon the current
value for the components of the
Disclosed Portfolio and will be updated
and disseminated by one or more major
market data vendors at least every 15
seconds during the Core Trading
Session on the Exchange. In addition,
during hours when the markets for
Fixed Income Securities in the Fund’s
portfolio are closed, the Portfolio
Indicative Value will be updated at least
every 15 seconds during the Core
Trading Session to reflect currency
exchange fluctuations.
The dissemination of the Portfolio
Indicative Value, together with the
Disclosed Portfolio, will allow investors
to determine the value of the underlying
portfolio of the Fund on a daily basis
and to provide a close estimate of that
value throughout the trading day.
Information regarding market price
and volume of the Shares is and will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services. The previous day’s closing
price and trading volume information
for the Shares 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 highspeed line.
Intra-day and end-of-day prices are
readily available through major market
data providers and broker-dealers for
the Fixed Income Securities, Money
Market Securities and derivative
instruments held by the Fund.
24 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.
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
Initial and Continued Listing
The Shares will be subject to Rule
8.600, which sets forth the initial and
continued listing criteria applicable to
Managed Fund Shares. The Exchange
represents that, for initial and/or
continued listing, the Fund must be in
compliance with Rule 10A–3 under the
Exchange Act,25 as provided by NYSE
Arca Equities Rule 5.3. A minimum of
100,000 Shares will be outstanding at
the commencement of trading on the
Exchange. The Exchange will obtain a
representation from the issuer of the
Shares that the NAV per Share will be
calculated daily and that the NAV and
the Disclosed Portfolio will be made
available to all market participants at
the same time.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund. Shares of the Fund will be
halted if the ‘‘circuit breaker’’ parameters
in NYSE Arca Equities Rule 7.12 are
reached. Trading may be halted because
of market conditions or for reasons that,
in the view of the Exchange, make
trading in the Shares inadvisable. These
may include: (1) The extent to which
trading is not occurring in the securities
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 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.
25 See
E:\FR\FM\10JNN1.SGM
17 CFR 240.10A–3.
10JNN1
Federal Register / Vol. 76, No. 112 / Friday, June 10, 2011 / Notices
Surveillance
The Exchange intends to utilize its
existing surveillance procedures
applicable to derivative products (which
includes Managed Fund Shares) to
monitor trading in the Shares. The
Exchange represents that these
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules and
applicable federal securities laws.
The Exchange’s current trading
surveillance focuses on detecting
securities trading outside their normal
patterns. When such situations are
detected, surveillance analysis follows
and investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange may obtain information
via the Intermarket Surveillance Group
(‘‘ISG’’) from other exchanges who are
members of the ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.26
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit (‘‘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.
26 For a list of the current members of ISG, see
https://www.isgportal.org. The Exchange notes that
not all of the components of the Disclosed Portfolio
for the Fund may trade on exchanges that are
members of the ISG or with which the Exchange has
in place a comprehensive surveillance sharing
agreement.
VerDate Mar<15>2010
14:33 Jun 09, 2011
Jkt 223001
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 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) 27
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
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, under normal
circumstances, the Fund will invest at
least 80% of its net assets in Fixed
Income Securities denominated in
Euros. The Fund intends to focus its
investments on Sovereign Debt, as
described above. The Fund will invest
up to 20% of its net assets only in
corporate bonds that the Adviser or SubAdviser deems to be sufficiently liquid.
Generally a corporate bond must have
$200 million or more par amount
outstanding and significant par value
traded to be considered as an eligible
investment. The Fund expects to have
75% or more of its assets invested in
investment grade bonds, though this
percentage may change from time to
time in accordance with market
conditions and the debt ratings assigned
to countries and issuers. Under normal
circumstances, the Fund will invest no
more than 20% of the value of the
Fund’s net assets in derivative
27 15
PO 00000
U.S.C. 78f(b)(5).
Frm 00087
Fmt 4703
Sfmt 4703
34117
instruments. Such investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage. The Fund will not
invest in non-U.S. equity securities.
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 website 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
website 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 website 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
E:\FR\FM\10JNN1.SGM
10JNN1
34118
Federal Register / Vol. 76, No. 112 / Friday, June 10, 2011 / Notices
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 activelymanaged 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
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.
WReier-Aviles on DSKGBLS3C1PROD with NOTICES
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
shall:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
VerDate Mar<15>2010
17:21 Jun 09, 2011
Jkt 223001
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2011–31 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64605; File No. SR–DTC–
2011–05]
Self-Regulatory Organizations; The
Depository Trust Company; Order
Granting Approval of a Proposed Rule
Change To Amend Rules Relating to
the Memo Segregation Function
June 6, 2011.
I. Introduction
On April 15, 2011, The Depository
Trust Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) proposed rule change
All submissions should refer to File
SR–DTC–2011–05 pursuant to Section
Number SR–NYSEArca–2011–31. This
19(b)(1) of the Securities Exchange Act
file number should be included on the
of 1934 (‘‘Act’’).1 Notice of the proposal
subject line if e-mail is used. To help the was published in the Federal Register
Commission process and review your
on May 4, 2011.2 The Commission
comments more efficiently, please use
received no comment letters. For the
only one method. The Commission will reasons discussed below, the
post all comments on the Commission’s Commission is granting approval of the
Internet Web site (https://www.sec.gov/
proposed rule change.
rules/sro.shtml). Copies of the
II. Description
submission, all subsequent
DTC’s Memo Segregation Service
amendments, all written statements
(‘‘MSEG’’) is an optional service which
with respect to the proposed rule
offers a mechanism for broker-dealer
change that are filed with the
participants to protect fully-paid or
Commission, and all written
excess margin securities by allowing the
communications relating to the
participant to shield from unintended
proposed rule change between the
Commission and any person, other than delivery a designated quantity of
securities that are in the participant’s
those that may be withheld from the
DTC free account or that may be
public in accordance with the
received during the daily processing
provisions of 5 U.S.C. 552, will be
cycle. Currently, a participant may set a
available for website viewing and
‘‘counter’’ for a specified minimum
printing in the Commission’s Public
quantity of each security to be held in
Reference Room, 100 F Street, NE.,
its account as a threshold to any
Washington, DC 20549, on official
intraday redelivery. When the counter
business days between the hours of 10
for a security is greater than the
a.m. and 3 p.m. Copies of the filing will inventory of the participant, MSEG will
also be available for inspection and
prevent the delivery of any quantity of
copying at the principal office of the
the security out of the participant’s
Exchange. All comments received will
account unless: (1) The delivery is a
be posted without change; the
permitted delivery (e.g., a free of value
Commission does not edit personal
ACATS delivery or a ‘‘turnaround’’ as
identifying information from
described below) or (2) the participant
submissions. You should submit only
provides DTC with new instructions to
information that you wish to make
reduce the MSEG counter.
The MSEG procedures currently
available publicly. All submissions
should refer to File No. SR–NYSEArca– support two optional ‘‘turnaround’’
2011–31 and should be submitted on or MSEG indicators which enable
participants to make deliveries for
before July 1, 2011.
certain transaction types (including, but
For the Commission, by the Division of
not limited to, stock loans and stock
Trading and Markets, pursuant to delegated
loan returns) from certain positions
authority.28
received intraday regardless of any
Cathy H. Ahn,
MSEG-related deficit. Recently, DTC
Deputy Secretary.
was advised by the Regulatory and
[FR Doc. 2011–14415 Filed 6–9–11; 8:45 am]
Clearance Committee of the Securities
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(1).
Exchange Act Release No. 64360
(April 28, 2011), 76 FR 25389 (May 4, 2011).
2 Securities
28 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00088
Fmt 4703
Sfmt 4703
E:\FR\FM\10JNN1.SGM
10JNN1
]]>Agencies
[Federal Register Volume 76, Number 112 (Friday, June 10, 2011)]
[Notices]
[Pages 34112-34118]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14415]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64608; File No. SR-NYSEArca-2011-31]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade the Shares of the WisdomTree
Dreyfus Euro Debt Fund Under NYSE Arca Equities Rule 8.600
June 6, 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 24, 2011, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I 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 fund of the WisdomTree Trust (the ``Trust'') under NYSE
Arca Equities Rule 8.600 (``Managed Fund Shares''): WisdomTree Dreyfus
Euro Debt Fund. The text of the proposed rule change is available at
the Exchange, the Commission's Public Reference Room, and https://www.nyse.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares of the
WisdomTree Dreyfus Euro Debt Fund (``Fund'') under NYSE Arca Equities
Rule 8.600, which governs the listing and trading of Managed Fund
Shares on the Exchange.\3\ The Shares will be offered
[[Page 34113]]
by the Trust, which was established as a Delaware statutory trust on
December 15, 2005. The Trust is registered with the Commission as an
investment company and the Fund has filed a registration statement on
Form N-1A (``Registration Statement'') with the Commission. The Fund is
currently known as the ``WisdomTree Dreyfus Euro Fund'' and is an
actively managed exchange-traded fund. The Commission approved listing
and trading on the Exchange of the WisdomTree Dreyfus Euro Fund
pursuant to Section 19(b)(2) of the Exchange Act on May 8, 2008 (``May
2008 Order'').\4\ On April 14, 2011, the WisdomTree Dreyfus Euro Fund
filed a supplement to its Registration Statement (the ``Supplement'')
pursuant to Rule 497 under the Securities Act of 1933.\5\ As stated in
the Supplement, the WisdomTree Dreyfus Euro Fund, effective on or after
June 27, 2011, will change its investment objective and strategy and
will be renamed the ``WisdomTree Dreyfus Euro Debt Fund.'' \6\ The
WisdomTree Dreyfus Euro Fund's new name, investment objective, and
investment strategies, which are not reflected in the May 2008 Order,
are described below. Shareholders of the WisdomTree Dreyfus Euro Fund
who wish to remain in the Fund do not need to take any action.
Shareholders who do not wish to remain invested in the Fund may sell
their Shares at any time.
---------------------------------------------------------------------------
\3\ The Commission approved NYSE Arca Equities Rule 8.600 and
the listing and trading of certain funds of the PowerShares Actively
Managed Funds Trust on the Exchange pursuant to Rule 8.600 in
Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR
19544 (April 10, 2008) (SR-NYSEArca-2008-25). The Commission also
previously approved listing and trading on the Exchange of a number
of actively managed funds under Rule 8.600. See, e.g., Securities
Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14,
2008) (SR-NYSEArca-2008-31) (order approving Exchange listing and
trading of twelve actively managed funds of the WisdomTree Trust);
58564 (September 17, 2008), 73 FR 55194 (September 24, 2008) (SR-
NYSEArca-2008-86) (order approving Exchange listing and trading of
WisdomTree Dreyfus Emerging Currency Fund); 62604 (July 30, 2010),
75 FR 47323 (August 5, 2010) (SR-NYSEArca-2010-49) (order approving
listing and trading of WisdomTree Emerging Markets Local Debt Fund);
62623 (August 2, 2010), 75 FR 47652 (August 6, 2010) (SR-NYSEArca-
2010-51) (order approving listing and trading of WisdomTree Dreyfus
Commodity Currency Fund); 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); and 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).
\4\ See Securities Exchange Act Release No. 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).
\5\ 15 U.S.C. 77a et seq.
\6\ See Form 497, Supplement to Registration Statement on Form
N-1A for the Trust, dated April 14, 2011 (File Nos. 333-132380 and
811-21864). The descriptions of the Fund and the Shares contained
herein are based, in part, on information in the Supplement and the
Registration Statement.
---------------------------------------------------------------------------
Description of the Shares and the Fund
WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'')
is the investment adviser (``Adviser'') to the Fund.\7\ The Dreyfus
Corporation serves as sub-adviser for the Fund (``Sub-Adviser'').\8\
The Bank of New York Mellon is the administrator, custodian and
transfer agent for the Trust. ALPS Distributors, Inc. serves as the
distributor for the Trust.\9\
---------------------------------------------------------------------------
\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 Investment Company Act of
1940 (15 U.S.C. 80a-1) (``1940 Act''). See Investment Company Act
Release No. 28171 (October 27, 2008) (File No. 812-13458). In
compliance with Commentary .05 to NYSE Arca Equities Rule 8.600,
which applies to Managed Fund Shares based on an international or
global portfolio, the Trust's application for exemptive relief under
the 1940 Act states that the Fund will comply with the federal
securities laws in accepting securities for deposits and satisfying
redemptions with redemption securities, including that the
securities accepted for deposits and the securities used to satisfy
redemption requests are sold in transactions that would be exempt
from registration under the Securities Act of 1933 (15 U.S.C. 77a).
---------------------------------------------------------------------------
Commentary .06 to Rule 8.600 provides that, if the investment
adviser to the Investment Company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect a
``fire wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such Investment Company portfolio.\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 nonpublic
information regarding the open-end fund's portfolio. Commentary .06 to
Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the
establishment of a ``fire wall'' between the investment adviser and the
broker-dealer reflects the applicable open-end fund's portfolio, not an
underlying benchmark index, as is the case with index-based funds. The
Adviser is not affiliated with any broker-dealer. 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 addition, Sub-Adviser personnel who make decisions
regarding the Fund's portfolio are subject to procedures designed to
prevent the use and dissemination of material nonpublic information
regarding the Fund's portfolio. In the event (a) the Adviser or the
Sub-Adviser becomes newly affiliated with a broker-dealer, or (b) any
new adviser or sub-adviser becomes affiliated with a broker-dealer,
they [sic] will implement a fire wall with respect to such broker-
dealer regarding access to information concerning the composition and/
or changes to the portfolio, and will be subject to procedures designed
to prevent the use and dissemination of material non-public information
regarding such portfolio.
---------------------------------------------------------------------------
\10\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the 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.
---------------------------------------------------------------------------
WisdomTree Dreyfus Euro Debt Fund
As noted above, effective on or after June 27, 2011, the WisdomTree
Dreyfus Euro Fund will change its investment objective and investment
strategies and be renamed the ``WisdomTree Dreyfus Euro Debt Fund.''
Upon implementation of the change, the Fund's new investment objective
will be to seek a high level of total returns consisting of both income
and capital appreciation and its investment strategies will be changed
as described below.\11\
---------------------------------------------------------------------------
\11\ The Adviser represents that the Supplement has been sent to
existing Shareholders of the Fund to notify them of the planned
change. The Supplement and additional information have been posted
on the Fund's website at https://www.wisdomtree.com.
---------------------------------------------------------------------------
Euro-Denominated Debt
Under normal circumstances, the Fund will invest at least 80% of
its net assets in Fixed Income Securities denominated in Euros.\12\ For
purposes of this proposed rule change, Fixed Income Securities include
bonds, notes or other debt obligations, such as government or corporate
bonds, denominated in Euros, including issues denominated in Euros that
are issued by ``supranational issuers,'' such as the European
Investment Bank, International Bank for Reconstruction and Development,
and the International Finance Corporation, or other regional
[[Page 34114]]
development banks, as well as development agencies supported by other
national governments. Under normal circumstances, the Fund may invest
up to 20% of its assets in Fixed Income Securities denominated in U.S.
dollars. The Fund may invest in Money Market Securities and derivative
and other instruments, as described below.\13\
---------------------------------------------------------------------------
\12\ The term ``under normal market circumstances'' includes,
but is not limited to, the absence of extreme volatility or trading
halts in the fixed income markets or the financial markets
generally; operational issues causing dissemination of inaccurate
market information; or force majeure type events such as systems
failure, natural or man-made disaster, act of God, armed conflict,
act of terrorism, riot or labor disruption or any similar
intervening circumstance.
\13\ As of February 17, 2011, the amount of Euro-denominated
debt outstanding exceeded US$19.2 trillion. Source: Deutsche
Bundesbank, at https://www.bundesbank.de/statistik/statistik_eszb_neuesfenster_tabelle.php?stat=debt_securities&lang=.en.
---------------------------------------------------------------------------
The Fund intends to focus its investments on ``Sovereign Debt.''
For these purposes, Sovereign Debt means Fixed Income Securities issued
by governments, government agencies and government-sponsored
enterprises of countries in the European Union (``EU'') that are
denominated in Euros.\14\ This includes inflation-linked bonds designed
to provide protection against increases in general inflation rates. The
Fund may invest up to 20% of its net assets in corporate debt of
companies organized in EU countries or that have significant economic
ties to EU countries. The Fund will invest only in corporate bonds that
the Adviser or Sub-Adviser deems to be sufficiently liquid. Generally,
a corporate bond must have $200 million or more par amount outstanding
and significant par value traded to be considered as an eligible
investment. 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), (ii)
such investment is consistent with the Fund's goal of providing
exposure to a broad range of Fixed Income Securities denominated in
Euros, and (iii) such investment is deemed by the Adviser or Sub-
Adviser to be in the best interest of the Fund.
---------------------------------------------------------------------------
\14\ As of February 17, 2011, the amount of sovereign Euro-
denominated debt outstanding exceeded US$8.02 trillion. Source:
Deutsche Bundesbank, at https://www.bundesbank.de/statistik/statistik_eszb_neuesfenster_tabelle.php?stat=debt_securities&lang=.en.
---------------------------------------------------------------------------
The Fund intends to provide broad exposure to countries in the EU.
As a general matter, the Fund will invest a higher percentage of its
assets in countries with larger and more liquid debt markets. The
Fund's exposure to any single country generally will be limited to 20%
of the Fund's assets. The percentage of Fund assets invested in a
specific country or issuer will change from time to time.
The universe of Euro-denominated Fixed Income Securities currently
includes securities that are rated ``investment grade'' as well as
``non-investment grade.'' As the Fund intends to provide broad-based
exposure to Euro-denominated Fixed Income Securities, the Fund will
invest in both investment-grade and non-investment-grade securities.
Securities rated investment grade generally are considered to be of
higher credit quality and subject to lower default risk. Although
securities rated below investment grade may offer the potential for
higher yields, they generally are subject to a higher potential risk of
loss. The Fund expects to have 75% or more of its assets invested in
investment grade bonds, though this percentage may change from time to
time in accordance with market conditions and the debt ratings assigned
to countries and issuers.
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. 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 or Sub-
Adviser will consider, for example, current information about the
credit quality of the issuer and whether or not the issuer of the
security has issued other rated securities.
The Fund attempts to limit interest rate risk by maintaining an
aggregate portfolio duration of between two and eight years under
normal market conditions. Aggregate portfolio duration is important to
investors as an indication of the Fund's sensitivity to changes in
interest rates. Funds with higher durations generally are subject to
greater interest rate risk. An aggregate portfolio duration of between
two and eight years generally would be considered to be
``intermediate.'' The Fund's actual portfolio duration may be longer or
shorter depending upon market conditions. The Fund may also invest in
short-term Money Market Securities (as defined below) denominated in
the currencies of countries in which the Fund invests.
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).\15\
---------------------------------------------------------------------------
\15\ 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).
---------------------------------------------------------------------------
The Fund intends to qualify each year as a regulated investment
company (a ``RIC'') under Subchapter M of the Internal Revenue Code of
1986, as amended.\16\ 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.
---------------------------------------------------------------------------
\16\ 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
[[Page 34115]]
more than 30% of the weight of the Fund's portfolio and the five
highest weighted portfolio securities of the Fund (other than U.S.
government securities and/or non-U.S. government securities) will not
in the aggregate account for more than 65% of the weight of the Fund's
portfolio. For these purposes, the Fund may treat repurchase agreements
collateralized by U.S. government securities or non-U.S. government
securities as U.S. or non-U.S. government securities, as applicable.
Money Market Securities
Assets not invested in Fixed Income Securities generally will be
invested in 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 short-term U.S.
government securities or non-U.S. government securities; money market
mutual funds; and deposits and other obligations of U.S. and non-U.S.
banks and financial institutions. All Money Market Securities acquired
by the Fund will be rated investment grade, except that the Fund may
invest in unrated Money Market Securities that are deemed by the
Adviser or Sub-Adviser to be of comparable quality to Money Market
Securities rated investment grade. In determining whether a security is
of ``comparable quality,'' the Adviser or Sub-Adviser will consider,
for example, current information about the credit quality of the issuer
and whether or not the issuer of the security has issued other rated
securities.
Derivative Instruments and Other Investments
The Fund may use derivative instruments as part of its investment
strategies. Examples of derivative instruments include listed futures
contracts,\17\ forward currency contracts, non-deliverable forward
currency contracts, currency and interest rate swaps, currency options,
options on futures contracts, swap agreements and credit-linked
notes.\18\ The Fund's use of derivative instruments (other than credit-
linked notes) will be collateralized or otherwise backed by investments
in short term, high-quality U.S. Money Market Securities. Under normal
circumstances, the Fund will invest no more than 20% of the value of
the Fund's net assets in derivative instruments. Such investments will
be consistent with the Fund's investment objective and will not be used
to enhance leverage.
---------------------------------------------------------------------------
\17\ The listed futures contracts in which the Fund will invest
may be listed on exchanges in the U.S. or in London, Hong Kong or
Singapore. Each of the United Kingdom's primary financial markets
regulator, the Financial Services Authority, Hong Kong's primary
financial markets regulator, the Securities and Futures Commission,
and Singapore's primary financial markets regulator, the Monetary
Authority of Singapore, are signatories to the International
Organization of Securities Commissions (``IOSCO'') Multilateral
Memorandum of Understanding (``MMOU''), which is a multi-party
information sharing arrangement among major financial regulators.
Both the Commission and the Commodity Futures Trading Commission are
signatories to the IOSCO MMOU.
\18\ The Fund may invest in credit-linked notes. A credit linked
note is a type of structured note whose value is linked to an
underlying reference asset. Credit linked notes typically provide
periodic payments of interest as well as payment of principal upon
maturity. The value of the periodic payments and the principal
amount payable upon maturity are tied (positively or negatively) to
a reference asset such as an index, government bond, interest rate
or currency exchange rate. The ongoing payments and principal upon
maturity typically will increase or decrease depending on increases
or decreases in the value of the reference asset. The Fund's
investments in credit-linked notes will be limited to notes
providing exposure to Fixed Income Securities denominated in Euros.
The Fund's overall investment in credit-linked notes will not exceed
25% of the Fund's assets.
---------------------------------------------------------------------------
With respect to certain kinds of derivative transactions entered
into by the Fund that involve obligations to make future payments to
third parties, including, but not limited to, futures, forward
contracts, swap contracts, the purchase of securities on a when-issued
or delayed delivery basis, or reverse repurchase agreements, the Fund,
in accordance with applicable federal securities laws, rules, and
interpretations thereof, will ``set aside'' liquid assets to ``cover''
open positions with respect to such transactions.\19\
---------------------------------------------------------------------------
\19\ 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.
The Fund may enter into swap agreements, including interest rate
swaps and currency swaps (e.g., Euro vs. U.S. dollar), and may buy or
sell put and call options on foreign currencies, either on exchanges or
in the over-the-counter market. The Fund may enter into repurchase
agreements with counterparties that are deemed to present acceptable
credit risks, and may enter into reverse repurchase agreements, which
involve the sale of securities held by the Fund subject to its
agreement to repurchase the securities at an agreed upon date or upon
demand and at a price reflecting a market rate of interest.
The Fund may invest in the securities of other investment companies
(including money market funds and exchange-traded funds (``ETFs'')).
The Fund may invest up to an aggregate amount of 15% of its net assets
in (a) illiquid securities and (b) Rule 144A securities. Illiquid
securities include securities subject to contractual or other
restrictions on resale and other instruments that lack readily
available markets.\20\
---------------------------------------------------------------------------
\20\ 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
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 ETF. 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).
---------------------------------------------------------------------------
The Fund will not invest in non-U.S. equity securities.
The Shares
The Fund issues and redeems Shares on a continuous basis at net
asset value (``NAV'') \21\ only in large blocks of Shares (``Creation
Units'') in transactions with authorized participants. Creation Units
[[Page 34116]]
generally will consist of 100,000 Shares, though this may change from
time to time. Creation Units are not expected to consist of less than
50,000 Shares. The Fund generally will issue and redeem Creation Units
in exchange for a portfolio of Fixed Income Securities closely
approximating the holdings of the Fund and/or a designated amount of
cash in U.S. dollars. Once created, Shares of the Fund will trade on
the secondary market in amounts less than a Creation Unit. 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 and an amount of cash. Together, such Fixed
Income Securities and amount of cash constitute the ``Redemption
Payment.'' The Redemption Payment may consist entirely of cash at the
discretion of the Fund.
---------------------------------------------------------------------------
\21\ The NAV of the Fund's Shares generally is calculated once
daily Monday through Friday as of the close of regular trading on
the New York Stock Exchange, generally 4:00 p.m. Eastern time (the
``NAV Calculation Time''). NAV per Share is calculated by dividing
the Fund's net assets by the number of Fund Shares outstanding. For
more information regarding the valuation of Fund investments in
calculating the Fund's NAV, see the Registration Statement.
---------------------------------------------------------------------------
Additional information regarding the Shares and the Fund, including
investment strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions and taxes is
included in the Registration Statement.
Availability of Information
The Fund's Web site (https://www.wisdomtree.com), which will be
publicly available prior to the public offering of Shares, will include
a form of the Prospectus for the Fund that may be downloaded. The
website will include additional quantitative information updated on a
daily basis, including, for the Fund: (1) The prior business day's
reported NAV, mid-point of the bid/ask spread at the time of
calculation of such NAV (the ``Bid/Ask Price''),\22\ 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 \23\ on the Exchange, the Trust will
disclose on its website the identities and quantities of the portfolio
of securities and other assets (the ``Disclosed Portfolio'') held by
the Fund that will form the basis for the Fund's calculation of NAV at
the end of the business day.\24\ The Disclosed Portfolio will include,
as applicable, the names, quantity, percentage weighting and market
value of Fixed Income Securities, and other assets held by the Fund and
the characteristics of such assets. The website and information will be
publicly available at no charge.
---------------------------------------------------------------------------
\22\ The Bid/Ask Price of the Fund is determined using the
midpoint of the highest bid and the lowest offer on the Exchange as
of the time of calculation of such Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
\23\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern
time.
\24\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Notwithstanding the
foregoing, portfolio trades that are executed prior to the opening
of the Exchange on any business day may be booked and reflected in
NAV on such business day. Accordingly, the Fund will be able to
disclose at the beginning of the business day the portfolio that
will form the basis for the NAV calculation at the end of the
business day.
---------------------------------------------------------------------------
In addition, for the Fund, an estimated value, defined in Rule
8.600 as the ``Portfolio Indicative Value,'' that reflects an estimated
intraday value of the Fund's portfolio, will be disseminated. The
Portfolio Indicative Value will be based upon the current value for the
components of the Disclosed Portfolio and will be updated and
disseminated by one or more major market data vendors at least every 15
seconds during the Core Trading Session on the Exchange. In addition,
during hours when the markets for Fixed Income Securities in the Fund's
portfolio are closed, the Portfolio Indicative Value will be updated at
least every 15 seconds during the Core Trading Session to reflect
currency exchange fluctuations.
The dissemination of the Portfolio Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the Fund on a daily basis and to provide a
close estimate of that value throughout the trading day.
Information regarding market price and volume of the Shares is and
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. The
previous day's closing price and trading volume information for the
Shares will be published daily in the financial section of newspapers.
Quotation and last sale information for the Shares will be available
via the Consolidated Tape Association high-speed line.
Intra-day and end-of-day prices are readily available through major
market data providers and broker-dealers for the Fixed Income
Securities, Money Market Securities and derivative instruments held by
the Fund.
Initial and Continued Listing
The Shares will be subject to Rule 8.600, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Fund must be in compliance with Rule 10A-3 under the
Exchange Act,\25\ as provided by NYSE Arca Equities Rule 5.3. A minimum
of 100,000 Shares will be outstanding at the commencement of trading on
the Exchange. The Exchange will obtain a representation from the issuer
of the Shares that the NAV per Share will be calculated daily and that
the NAV and the Disclosed Portfolio will be made available to all
market participants at the same time.
---------------------------------------------------------------------------
\25\ 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 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.
[[Page 34117]]
Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (which includes Managed
Fund Shares) to monitor trading in the Shares. The Exchange represents
that these procedures are adequate to properly monitor Exchange trading
of the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations.
The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges who are members of
the ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.\26\
---------------------------------------------------------------------------
\26\ For a list of the current members of ISG, see https://www.isgportal.org. The Exchange notes that not all of the components
of the Disclosed Portfolio for the Fund may trade on exchanges that
are members of the ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------
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
Equity Trading Permit (``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 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) \27\ 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.
---------------------------------------------------------------------------
\27\ 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, under normal
circumstances, the Fund will invest at least 80% of its net assets in
Fixed Income Securities denominated in Euros. The Fund intends to focus
its investments on Sovereign Debt, as described above. The Fund will
invest up to 20% of its net assets only in corporate bonds that the
Adviser or Sub-Adviser deems to be sufficiently liquid. Generally a
corporate bond must have $200 million or more par amount outstanding
and significant par value traded to be considered as an eligible
investment. The Fund expects to have 75% or more of its assets invested
in investment grade bonds, though this percentage may change from time
to time in accordance with market conditions and the debt ratings
assigned to countries and issuers. Under normal circumstances, the Fund
will invest no more than 20% of the value of the Fund's net assets in
derivative instruments. Such investments will be consistent with the
Fund's investment objective and will not be used to enhance leverage.
The Fund will not invest in non-U.S. equity securities.
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 website 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 website 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 website
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
[[Page 34118]]
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 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 shall:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2011-31 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2011-31. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for website
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 the filing will also be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File No. SR-
NYSEArca-2011-31 and should be submitted on or before July 1, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
---------------------------------------------------------------------------
\28\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-14415 Filed 6-9-11; 8:45 am]
BILLING CODE 8011-01-P
