Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change Relating to Listing and Trading of the WisdomTree Dreyfus Australia & New Zealand Debt Fund Under NYSE Arca Equities Rule 8.600, 62112-62116 [2011-25830]

Download as PDF 62112 Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Specifically, the Exchange believes this proposed rule change is appropriate and reasonable because the functionality will assist BOX Options Participants in reducing execution fees resulting from the potential interaction of executable proprietary buy and sell trading interest from the same firm. Additionally, the Exchange believes that offering this trade prevention functionality may streamline certain regulatory functions by reducing false positive results that may occur on wash trading surveillance reports when quotes or orders are executed under the same Firm ID. Further, the Exchange notes that similar functionality has previously been approved for BATS Options trading system, and exists on the Exchange’s equities trading system.7 Finally, the Exchange believes the proposed rule change will benefit BOX Options Participants, will allow BOX to remain competitive with other exchanges, and that implementation should not be delayed. 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 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 either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action mstockstill on DSK4VPTVN1PROD with NOTICES This proposed rule change is effective upon filing pursuant to paragraph (A) of section 19(b)(3) of the Exchange Act 8 and Rule 19b–4(f)(6) thereunder.9 The Exchange asserts that the proposed rule 7 See Securities Exchange Act Release Nos. 61419 (January 26, 2010), 75 FR 5157 (February 1, 2010) (SR–BATS–2009–031) and 60246 (July 6, 2009), 74 FR 34057 (July 14, 2009) (SR–BX–2009–031). 8 15 U.S.C. 78s(b)(3)(A). 9 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission notes that the Exchange satisfied this five-day pre-filing requirement. VerDate Mar<15>2010 16:07 Oct 05, 2011 Jkt 226001 change: (i) Does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) does not become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided the self-regulatory organization has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. 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. 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 rulecomments@sec.gov. Please include File Number SR–BX–2011–067 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–BX–2011–067. 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 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BX– 2011–067 and should be submitted on or before October 27, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Elizabeth M. Murphy, Secretary. [FR Doc. 2011–25794 Filed 10–5–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65458; File No. SR– NYSEArca–2011–54] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change Relating to Listing and Trading of the WisdomTree Dreyfus Australia & New Zealand Debt Fund Under NYSE Arca Equities Rule 8.600 September 30, 2011. I. Introduction On August 3, 2011, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the WisdomTree Dreyfus Australia & New Zealand Debt Fund (‘‘Fund’’) under NYSE Arca Equities Rule 8.600. The proposed rule change was published for comment in the Federal Register on August 24, 2011.3 The Commission received no comments 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 65160 (August 18, 2011), 76 FR 52998 (‘‘Notice’’). 1 15 E:\FR\FM\06OCN1.SGM 06OCN1 Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices on the proposal. This order grants approval of the proposed rule change. mstockstill on DSK4VPTVN1PROD with NOTICES II. Description of the Proposed Rule Change The Exchange proposes to list and trade Shares of the Fund under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange. The Shares will be offered by the WisdomTree Trust (‘‘Trust’’), which was established as a Delaware statutory trust and is registered with the Commission as an investment company. The Fund is currently known as the ‘‘WisdomTree Dreyfus New Zealand Dollar Fund’’ and is an actively managed exchange-traded fund.4 On April 14, 2011, the WisdomTree Dreyfus New Zealand Dollar Fund filed a supplement to its registration statement pursuant to Rule 497 under the Securities Act of 1933.5 As stated in the Supplement, the WisdomTree Dreyfus New Zealand Dollar Fund, effective on or after August 26, 2011, will change its investment objective and strategy and will be renamed the ‘‘WisdomTree Dreyfus Australia & New Zealand Debt Fund.’’ The WisdomTree Dreyfus New Zealand Dollar Fund’s new name, investment objective, and investment strategies are not reflected in the May 2008 Order and are described below. Shareholders 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.6 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 4 The Commission previously approved the listing and trading of shares of the WisdomTree Dreyfus New Zealand Dollar Fund on May 8, 2008 (‘‘May 2008 Order’’). See Securities Exchange Act Release No. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR–NYSEArca–2008–31) (approving the listing and trading of twelve actively-managed funds of the WisdomTree Trust on the Exchange). In the May 2008 Order, the Commission also approved the WisdomTree Australian Dollar Fund for Exchange listing and trading; however, the shares of such fund has not commenced trading. 5 See Form 497, Supplement to Registration Statement (‘‘Supplement’’) on Form N–1A for the Trust (‘‘Registration Statement’’), dated April 14, 2011 (File Nos. 333–132380 and 811–21864). 6 The Adviser represents that the Supplement was sent to shareholders of the Fund to notify them of the planned change. The Supplement and additional information are posted on the Fund’s Web site at https://www.wisdomtree.com. 7 WisdomTree Investments, Inc. 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. VerDate Mar<15>2010 16:07 Oct 05, 2011 Jkt 226001 York Mellon is the administrator, custodian, and transfer agent for the Trust. ALPS Distributors, Inc. serves as the distributor for the Trust.9 The Exchange states that, while the Adviser is not affiliated with any broker-dealer, the Sub-Adviser is affiliated with multiple broker-dealers. As a result, the Sub-Adviser has implemented a ‘‘fire wall’’ with respect to such brokerdealers regarding access to information concerning the composition and/or changes to the Fund’s portfolio.10 In addition, the 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. WisdomTree Dreyfus Australia & New Zealand Debt Fund 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 herein. Under normal circumstances, the Fund will invest at least 80% of its net assets in Fixed Income Securities denominated in Australian or New Zealand dollars and may invest up to 20% of its assets in Fixed Income Securities denominated in U.S. dollars.11 ‘‘Fixed Income Securities’’ 9 The Commission has issued an order granting certain exemptive relief to the Trust under the Investment Company Act of 1940 (‘‘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. 10 See Commentary .06 to NYSE Arca Equities Rule 8.600. The Exchange represents that, 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, it 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. 11 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. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 62113 include bonds, notes, or other debt obligations, such as government or corporate bonds, denominated in Australian or New Zealand dollars, including issues denominated in Australian or New Zealand dollars that are issued by ‘‘supranational issuers,’’ such as the International Bank for Reconstruction and Development and the International Finance Corporation, as well as development agencies supported by other national governments or other regional development banks. The Fund may also invest in Money Market Securities and derivative instruments and other investments, as described below. The Fund intends to focus its investments on ‘‘Sovereign Debt,’’ which means Fixed Income Securities issued by governments, government agencies and government-sponsored enterprises in Australia and New Zealand that are denominated in either Australian or New Zealand dollars. This includes inflation-linked bonds designed to provide protection against increases in general inflation rates. The Fund may invest in corporate debt of companies organized in Australia or New Zealand or that have significant economic ties to Australia or New Zealand. 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 lead to a decrease in the average par amount outstanding of bond issuances. Therefore, although the Fund does not intend to do so, the Fund may invest up to 5% of its net assets in corporate bonds with less than $200 million par amount outstanding if (i) The Adviser or Sub-Adviser deems such security to be sufficiently liquid based on its analysis of the market for such security (based on, for example, brokerdealer quotations or its analysis of the trading history of the security or the trading history of other securities issued by the issuer), (ii) such investment is consistent with the Fund’s goal of providing exposure to a broad range of Fixed Income Securities denominated in Australian or New Zealand dollars, and (iii) such investment is deemed by the Adviser or Sub-Adviser to be in the best interest of the Fund. The Fund’s investments generally will be allocated among the countries according to relative economic size and market depth. As a larger country with greater market depth, it is anticipated that Australian issuers would comprise a larger percentage of the portfolio than E:\FR\FM\06OCN1.SGM 06OCN1 mstockstill on DSK4VPTVN1PROD with NOTICES 62114 Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices New Zealand issuers. 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 non-investment grade securities 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 in accordance with market conditions and/or 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.12 The Fund will attempt to limit interest rate risk by maintaining an aggregate portfolio duration of between two and eight years under normal market conditions, but 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 and 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 12 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. VerDate Mar<15>2010 16:07 Oct 05, 2011 Jkt 226001 and instrumentalities or governmentsponsored enterprises). The Fund intends to qualify each year as a regulated investment company (‘‘RIC’’) under Subchapter M of the Internal Revenue Code of 1986, as amended. In addition to satisfying the RIC diversification requirements, no portfolio security held by the Fund (other than U.S. government securities and/or non-U.S. government securities) will represent 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. Money Market Securities Assets not invested in Fixed Income Securities generally will be invested in Money Market Securities to help manage cash flows in and out of the Fund, such as in connection with the payment of dividends or expenses, to satisfy margin requirements, to provide collateral, or to otherwise back investments in derivative instruments. Money Market Securities include shortterm, 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 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.13 Derivative Instruments and Other Investments As part of its investment strategy, the Fund may use derivative instruments, such as listed futures contracts,14 13 See id. 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 14 The PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 forward currency contracts, nondeliverable forward currency contracts, currency and interest rate swaps, currency options, options on futures contracts, swap agreements, and creditlinked notes.15 The Fund’s use of derivative instruments (other than credit-linked notes) will be collateralized or otherwise backed by investments in short term, high-quality U.S. Money Market Securities. 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. The Fund may engage in foreign currency transactions and 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., Australian dollar vs. U.S. dollar), and may buy or sell put and call options on foreign currencies, either on exchanges or in the over-the-counter market. The 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 multiparty information sharing arrangement among major financial regulators. Both the Commission and the Commodity Futures Trading Commission are signatories to the IOSCO MMOU. 15 The Fund’s investments in credit-linked notes will be limited to notes providing exposure to Fixed Income Securities denominated in Australian or New Zealand dollars. The Fund’s overall investment in credit-linked notes will not exceed 25% of the Fund’s assets. See Notice, supra note 3, at n.16. E:\FR\FM\06OCN1.SGM 06OCN1 Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES Fund may enter into repurchase agreements with counterparties that are deemed to present acceptable credit risks and may enter into reverse repurchase agreements. In addition, the Fund may invest in the securities of other investment companies (including money market funds and exchangetraded funds). The Fund may invest up to an aggregate amount of 15% of its net assets in (a) illiquid securities and (b) Rule 144A securities. The Exchange represents that the Fund will not invest in non-U.S. equity securities. Additional information regarding the Trust, Fund, Shares, the Fund’s investment strategies, risks, creation and redemption procedures, fees, portfolio holdings and disclosure policies, distributions and taxes, availability of information, trading rules and halts, and surveillance procedures, among other things, can be found in the Notice, the Registration Statement, and the Supplement, as applicable.16 III. Discussion and Commission’s Findings The Commission has carefully reviewed the proposed rule change and finds that it is consistent with the requirements of Section 6 of the Act and the rules and regulations thereunder applicable to a national securities exchange.17 In particular, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,18 which requires, among other things, that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission notes that the Shares must comply with the requirements of NYSE Arca Equities Rule 8.600 to be listed and traded on the Exchange. The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Act,19 which sets forth Congress’ finding that it is in the public interest and appropriate for the protection of investors and the 16 See Notice, Registration Statement, and Supplement, supra notes 3 and 5, respectively. 17 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 18 17 U.S.C. 78f(b)(5). 19 15 U.S.C. 78k–1(a)(1)(C)(iii). VerDate Mar<15>2010 16:07 Oct 05, 2011 Jkt 226001 maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for, and transactions in, securities. Quotation and last-sale information for the Shares will be available via the Consolidated Tape Association high-speed line. In addition, the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be updated and widely disseminated at least every 15 seconds during the Core Trading Session on the Exchange.20 On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Trust will disclose on its Web site the Disclosed Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), held by the Fund that will form the basis for the Fund’s calculation of the net asset value (‘‘NAV’’) at the end of the business day.21 The NAV of the Fund’s Shares generally will be calculated once daily Monday through Friday as of the close of regular trading on the New York Stock Exchange (generally 4 p.m. Eastern time). In addition, information regarding market price and trading volume of the Shares will be continually available on a realtime basis throughout the day on brokers’ computer screens and other electronic services, and the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Intra-day and end-of-day prices are readily available through major market data providers and brokerdealers for the Fixed Income Securities, Money Market Securities, and derivative instruments held by the Fund. The Fund’s Web site will also include a form of the prospectus for the Fund, information relating to NAV, and other quantitative and trading information. The Commission further believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. The Commission notes that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that 20 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. 21 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. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 62115 the NAV and the Disclosed Portfolio will be made available to all market participants at the same time.22 In addition, the Exchange will halt trading in the Shares under the specific circumstances set forth in NYSE Arca Equities Rule 8.600(d)(2)(D), and may halt trading in the Shares if trading is not occurring in the securities and/or the financial instruments comprising the Disclosed Portfolio of the Fund, or if other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present.23 The Exchange will consider the suspension of trading in or removal from listing of the Shares if the Portfolio Indicative Value is no longer calculated or available or the Disclosed Portfolio is not made available to all market participants at the same time.24 The Exchange represents that the SubAdviser is affiliated with multiple broker-dealers and has implemented a ‘‘fire wall’’ with respect to such brokerdealers regarding access to information concerning the composition and/or changes to the Fund’s portfolio.25 The Exchange also states that it has a general policy prohibiting the distribution of material, non-public information by its employees. Further, the Commission notes that the Reporting Authority that provides the Disclosed Portfolio must 22 See NYSE Arca Equities Rule 8.600(d)(1)(B). respect to trading halts, the Exchange may consider other relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. 24 See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii). 25 See supra note 10 and accompanying text. The Commission notes that 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. 23 With E:\FR\FM\06OCN1.SGM 06OCN1 mstockstill on DSK4VPTVN1PROD with NOTICES 62116 Federal Register / Vol. 76, No. 194 / Thursday, October 6, 2011 / Notices implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material nonpublic information regarding the actual components of the portfolio.26 The Exchange represents that the Shares are deemed to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. In support of this proposal, the Exchange has made representations, including: (1) The Shares will be subject to NYSE Arca Equities Rule 8.600, which sets forth the initial and continued listing criteria applicable to Managed Fund Shares. (2) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. (3) The Exchange’s surveillance 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. (4) Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit (‘‘ETP’’) Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Specifically, the Information Bulletin will discuss the following: (a) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (b) 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; (c) 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; (d) how information regarding the Portfolio Indicative Value is disseminated; (e) 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 (f) trading and other information. (5) For initial and/or continued listing, the Fund must be in compliance with Rule 10A–3 under the Act,27 as provided by NYSE Arca Equities Rule 5.3. (6) The Fund will not invest in nonU.S. equity securities. The Fund’s investments will be consistent with the Fund’s investment objective and will not be used to enhance leverage. 26 See 27 See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii). 17 CFR 240.10A–3. VerDate Mar<15>2010 16:07 Oct 05, 2011 Jkt 226001 (7) A minimum of 100,000 Shares of the Fund will be outstanding at the commencement of trading on the Exchange. This approval order is based on the Exchange’s representations. For the foregoing reasons, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act 28 and the rules and regulations thereunder applicable to a national securities exchange. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,29 that the proposed rule change (SR–NYSEArca– 2011–54) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Elizabeth M. Murphy, Secretary. [FR Doc. 2011–25830 Filed 10–5–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65457; File No. SR– NYSEAmex–2011–63] Self-Regulatory Organizations; NYSE Amex LLC; Order Approving a Proposed Rule Change Amending NYSE Amex Equities Rule 17(c)(2)(B) To Make Permanent the Pilot Program That Permits the Exchange To Accept Inbound Orders Routed by Archipelago Securities LLC in Its Capacity as a Facility of Affiliated Exchanges and To Clarify the NYSE Amex Equities Rule 17(c)(2)(A)(ii) to More Accurately Reflect the Regulatory Services Agreement Between the Exchange and the Financial Industry Regulatory Authority September 30, 2011. I. Introduction On August 18, 2011, NYSE Amex LLC (‘‘NYSE Amex’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to make permanent the existing pilot program that permits the Exchange to accept inbound orders routed by Archipelago Securities LLC (‘‘Arca Securities’’) in its capacity as a facility 28 15 U.S.C. 78f(b)(5). U.S.C. 78s(b)(2). 30 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 29 15 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 of an affiliated exchange (with the attendant obligations and conditions), and to clarify the text of NYSE Amex Equities Rule 17(c)(2)(B) to more accurately reflect the regulatory services agreement (‘‘RSA’’) between the Exchange and the Financial Industry Regulatory Authority (‘‘FINRA’’). The proposed rule change was published for comment in the Federal Register on August 26, 2011.3 The Commission received no comment letters regarding the proposed rule change. This order approves the proposed rule change. II. Background Arca Securities is a broker-dealer that is an NYSE Amex member organization,4 and, among other things, is permitted to provide to members of the NYSE and NYSE Arca optional routing services to other market centers.5 On June 16, 2011, the Exchange filed an immediately effective proposed rule change to, among other things, permit the Exchange to receive inbound routes of equity orders that Arca Securities routes in its capacity as a facility of NYSE and NYSE Arca on a pilot basis ending September 30, 2011.6 The Exchange now seeks permanent approval of this inbound routing pilot.7 III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.8 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(1) of the Act,9 which requires, among other things, that a national 3 See Securities Exchange Act Release No. 65184 (August 22, 2011), 76 FR 53511 (‘‘Notice’’). 4 Arca Securities is owned indirectly by NYSE Euronext (‘‘NYSE Euronext’’), which also indirectly owns three registered securities exchanges—NYSE Arca, Inc. (‘‘NYSE Arca’’), the Exchange, and New York Stock Exchange LLC (‘‘NYSE’’). Thus, Arca Securities is an affiliate of each of these exchanges. 5 Arca Securities operates as a facility of NYSE and NYSE Arca that provides outbound routing from NYSE and NYSE Arca to other market centers, subject to certain conditions. See Securities Exchange Act Release Nos. 55590 (April 5, 2007), 72 FR 18707 (April 13, 2007) (SR–NYSE–2007–29); and 52497 (September 22, 2005), 70 FR 56949, 56952–56953 (September 29, 2005) (SR–PCX–2005– 90). 6 See Securities Exchange Act Release No. 64728 (June 23, 2011), 76 FR 38223 (June 29, 2011) (SR– NYSEAmex–2011–39) (‘‘Routing Pilot Release’’). See also Notice, 76 FR at 53511, n.5 and accompanying text. 7 See Notice. 8 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 9 15 U.S.C. 78f(b)(1). E:\FR\FM\06OCN1.SGM 06OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 194 (Thursday, October 6, 2011)]
[Notices]
[Pages 62112-62116]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25830]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65458; File No. SR-NYSEArca-2011-54]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change Relating to Listing and Trading of the 
WisdomTree Dreyfus Australia & New Zealand Debt Fund Under NYSE Arca 
Equities Rule 8.600

September 30, 2011.

I. Introduction

    On August 3, 2011, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the WisdomTree Dreyfus Australia 
& New Zealand Debt Fund (``Fund'') under NYSE Arca Equities Rule 8.600. 
The proposed rule change was published for comment in the Federal 
Register on August 24, 2011.\3\ The Commission received no comments

[[Page 62113]]

on the proposal. This order grants approval of the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 65160 (August 18, 
2011), 76 FR 52998 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade Shares of the Fund under 
NYSE Arca Equities Rule 8.600, which governs the listing and trading of 
Managed Fund Shares on the Exchange. The Shares will be offered by the 
WisdomTree Trust (``Trust''), which was established as a Delaware 
statutory trust and is registered with the Commission as an investment 
company. The Fund is currently known as the ``WisdomTree Dreyfus New 
Zealand Dollar Fund'' and is an actively managed exchange-traded 
fund.\4\ On April 14, 2011, the WisdomTree Dreyfus New Zealand Dollar 
Fund filed a supplement to its registration statement pursuant to Rule 
497 under the Securities Act of 1933.\5\ As stated in the Supplement, 
the WisdomTree Dreyfus New Zealand Dollar Fund, effective on or after 
August 26, 2011, will change its investment objective and strategy and 
will be renamed the ``WisdomTree Dreyfus Australia & New Zealand Debt 
Fund.'' The WisdomTree Dreyfus New Zealand Dollar Fund's new name, 
investment objective, and investment strategies are not reflected in 
the May 2008 Order and are described below. Shareholders 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.\6\
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    \4\ The Commission previously approved the listing and trading 
of shares of the WisdomTree Dreyfus New Zealand Dollar Fund on May 
8, 2008 (``May 2008 Order''). See Securities Exchange Act Release 
No. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-
2008-31) (approving the listing and trading of twelve actively-
managed funds of the WisdomTree Trust on the Exchange). In the May 
2008 Order, the Commission also approved the WisdomTree Australian 
Dollar Fund for Exchange listing and trading; however, the shares of 
such fund has not commenced trading.
    \5\ See Form 497, Supplement to Registration Statement 
(``Supplement'') on Form N-1A for the Trust (``Registration 
Statement''), dated April 14, 2011 (File Nos. 333-132380 and 811-
21864).
    \6\ The Adviser represents that the Supplement was sent to 
shareholders of the Fund to notify them of the planned change. The 
Supplement and additional information are posted on the Fund's Web 
site at https://www.wisdomtree.com.
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    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\ The Exchange states that, while the 
Adviser is not affiliated with any broker-dealer, the Sub-Adviser is 
affiliated with multiple broker-dealers. As a result, the Sub-Adviser 
has implemented a ``fire wall'' with respect to such broker-dealers 
regarding access to information concerning the composition and/or 
changes to the Fund's portfolio.\10\ In addition, the Sub-Adviser 
personnel who make decisions regarding the Fund's portfolio are subject 
to procedures designed to prevent the use and dissemination of material 
non-public information regarding the Fund's portfolio.
---------------------------------------------------------------------------

    \7\ WisdomTree Investments, Inc. 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 (``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.
    \10\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The 
Exchange represents that, 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, 
it 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 Australia & New Zealand Debt Fund

    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 herein. Under 
normal circumstances, the Fund will invest at least 80% of its net 
assets in Fixed Income Securities denominated in Australian or New 
Zealand dollars and may invest up to 20% of its assets in Fixed Income 
Securities denominated in U.S. dollars.\11\ ``Fixed Income Securities'' 
include bonds, notes, or other debt obligations, such as government or 
corporate bonds, denominated in Australian or New Zealand dollars, 
including issues denominated in Australian or New Zealand dollars that 
are issued by ``supranational issuers,'' such as the International Bank 
for Reconstruction and Development and the International Finance 
Corporation, as well as development agencies supported by other 
national governments or other regional development banks. The Fund may 
also invest in Money Market Securities and derivative instruments and 
other investments, as described below.
---------------------------------------------------------------------------

    \11\ 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.
---------------------------------------------------------------------------

    The Fund intends to focus its investments on ``Sovereign Debt,'' 
which means Fixed Income Securities issued by governments, government 
agencies and government-sponsored enterprises in Australia and New 
Zealand that are denominated in either Australian or New Zealand 
dollars. This includes inflation-linked bonds designed to provide 
protection against increases in general inflation rates. The Fund may 
invest in corporate debt of companies organized in Australia or New 
Zealand or that have significant economic ties to Australia or New 
Zealand. 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 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 Australian or New Zealand 
dollars, and (iii) such investment is deemed by the Adviser or Sub-
Adviser to be in the best interest of the Fund.
    The Fund's investments generally will be allocated among the 
countries according to relative economic size and market depth. As a 
larger country with greater market depth, it is anticipated that 
Australian issuers would comprise a larger percentage of the portfolio 
than

[[Page 62114]]

New Zealand issuers. 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 non-investment grade securities 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 in accordance with market conditions and/or 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.\12\
---------------------------------------------------------------------------

    \12\ 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 will attempt to limit interest rate risk by maintaining an 
aggregate portfolio duration of between two and eight years under 
normal market conditions, but 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 and will not concentrate 25% or more of the 
value of its total assets (taken at market value at the time of each 
investment) in any one industry, as that term is used in the 1940 Act 
(except that this restriction does not apply to obligations issued by 
the U.S. government, or any non-U.S. government, or their respective 
agencies and instrumentalities or government-sponsored enterprises).
    The Fund intends to qualify each year as a regulated investment 
company (``RIC'') under Subchapter M of the Internal Revenue Code of 
1986, as amended. In addition to satisfying the RIC diversification 
requirements, no portfolio security held by the Fund (other than U.S. 
government securities and/or non-U.S. government securities) will 
represent 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 to help manage cash flows in and 
out of the Fund, such as in connection with the payment of dividends or 
expenses, to satisfy margin requirements, to provide collateral, or to 
otherwise back investments in derivative instruments. 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.\13\
---------------------------------------------------------------------------

    \13\ See id.
---------------------------------------------------------------------------

Derivative Instruments and Other Investments

    As part of its investment strategy, the Fund may use derivative 
instruments, such as listed futures contracts,\14\ forward currency 
contracts, non-deliverable forward currency contracts, currency and 
interest rate swaps, currency options, options on futures contracts, 
swap agreements, and credit-linked notes.\15\ The Fund's use of 
derivative instruments (other than credit-linked notes) will be 
collateralized or otherwise backed by investments in short term, high-
quality U.S. Money Market Securities. 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.
---------------------------------------------------------------------------

    \14\ 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.
    \15\ The Fund's investments in credit-linked notes will be 
limited to notes providing exposure to Fixed Income Securities 
denominated in Australian or New Zealand dollars. The Fund's overall 
investment in credit-linked notes will not exceed 25% of the Fund's 
assets. See Notice, supra note 3, at n.16.
---------------------------------------------------------------------------

    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.
    The Fund may engage in foreign currency transactions and 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., Australian dollar vs. U.S. dollar), and 
may buy or sell put and call options on foreign currencies, either on 
exchanges or in the over-the-counter market. The

[[Page 62115]]

Fund may enter into repurchase agreements with counterparties that are 
deemed to present acceptable credit risks and may enter into reverse 
repurchase agreements. In addition, the Fund may invest in the 
securities of other investment companies (including money market funds 
and exchange-traded funds). The Fund may invest up to an aggregate 
amount of 15% of its net assets in (a) illiquid securities and (b) Rule 
144A securities. The Exchange represents that the Fund will not invest 
in non-U.S. equity securities.
    Additional information regarding the Trust, Fund, Shares, the 
Fund's investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings and disclosure policies, 
distributions and taxes, availability of information, trading rules and 
halts, and surveillance procedures, among other things, can be found in 
the Notice, the Registration Statement, and the Supplement, as 
applicable.\16\
---------------------------------------------------------------------------

    \16\ See Notice, Registration Statement, and Supplement, supra 
notes 3 and 5, respectively.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\17\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\18\ which 
requires, among other things, that the Exchange's rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The Commission notes that 
the Shares must comply with the requirements of NYSE Arca Equities Rule 
8.600 to be listed and traded on the Exchange.
---------------------------------------------------------------------------

    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \18\ 17 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\19\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via the Consolidated 
Tape Association high-speed line. In addition, the Portfolio Indicative 
Value, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be 
updated and widely disseminated at least every 15 seconds during the 
Core Trading Session on the Exchange.\20\ On each business day, before 
commencement of trading in Shares in the Core Trading Session on the 
Exchange, the Trust will disclose on its Web site the Disclosed 
Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), held by 
the Fund that will form the basis for the Fund's calculation of the net 
asset value (``NAV'') at the end of the business day.\21\ The NAV of 
the Fund's Shares generally will be calculated once daily Monday 
through Friday as of the close of regular trading on the New York Stock 
Exchange (generally 4 p.m. Eastern time). In addition, information 
regarding market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services, and the 
previous day's closing price and trading volume information for the 
Shares will be published daily in the financial section of newspapers. 
Intra-day 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. The Fund's Web site will also include a form of the 
prospectus for the Fund, information relating to NAV, and other 
quantitative and trading information.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \20\ 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.
    \21\ 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 Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes 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.\22\ 
In addition, the Exchange will halt trading in the Shares under the 
specific circumstances set forth in NYSE Arca Equities Rule 
8.600(d)(2)(D), and may halt trading in the Shares if trading is not 
occurring in the securities and/or the financial instruments comprising 
the Disclosed Portfolio of the Fund, or if other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\23\ The Exchange will consider the suspension of 
trading in or removal from listing of the Shares if the Portfolio 
Indicative Value is no longer calculated or available or the Disclosed 
Portfolio is not made available to all market participants at the same 
time.\24\ The Exchange represents that 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.\25\ 
The Exchange also states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. 
Further, the Commission notes that the Reporting Authority that 
provides the Disclosed Portfolio must

[[Page 62116]]

implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material non-public information 
regarding the actual components of the portfolio.\26\
---------------------------------------------------------------------------

    \22\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \23\ With respect to trading halts, the Exchange may consider 
other relevant factors in exercising its discretion to halt or 
suspend trading in the Shares of the Fund. Trading in Shares of the 
Fund will be halted if the circuit breaker parameters in NYSE Arca 
Equities Rule 7.12 have been reached. Trading also may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable.
    \24\ See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
    \25\ See supra note 10 and accompanying text. The Commission 
notes that 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.
    \26\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
---------------------------------------------------------------------------

    The Exchange represents that the Shares are deemed to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made representations, 
including:
    (1) The Shares will be subject to NYSE Arca Equities Rule 8.600, 
which sets forth the initial and continued listing criteria applicable 
to Managed Fund Shares.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange's surveillance 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.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Information Bulletin will discuss the 
following: (a) The procedures for purchases and redemptions of Shares 
in Creation Unit aggregations (and that Shares are not individually 
redeemable); (b) 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; (c) 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; (d) how information regarding the 
Portfolio Indicative Value is disseminated; (e) 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 (f) trading and other information.
    (5) For initial and/or continued listing, the Fund must be in 
compliance with Rule 10A-3 under the Act,\27\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \27\ See 17 CFR 240.10A-3.
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    (6) The Fund will not invest in non-U.S. equity securities. The 
Fund's investments will be consistent with the Fund's investment 
objective and will not be used to enhance leverage.
    (7) A minimum of 100,000 Shares of the Fund will be outstanding at 
the commencement of trading on the Exchange.
    This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \28\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \28\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\29\ that the proposed rule change (SR-NYSEArca-2011-54) be, and it 
hereby is, approved.
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    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25830 Filed 10-5-11; 8:45 am]
BILLING CODE 8011-01-P

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