Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change To List and Trade PIMCO Foreign Currency Strategy Exchange-Traded Fund Under NYSE Arca Equities Rule 8.600, 11238-11243 [2013-03490]
Download as PDF
<![CDATA[
11238
Federal Register / Vol. 78, No. 32 / Friday, February 15, 2013 / Notices
The Postal Service filed the following
material in conjunction with its Notice,
along with public (redacted) versions of
supporting financial information:
• Attachment 1—a redacted copy of
the Agreement;
• Attachment 2—a certified statement
required by 39 CFR 3015.5(c)(2);
• Attachment 3—a redacted copy of
Governors’ Decision No. 10–1; and
• Attachment 4—an application for
non-public treatment of materials filed
under seal.
Functional equivalency. The Postal
Service asserts that the Agreement is
substantially similar to the baseline
agreement filed in Docket No. CP2010–
36 because it shares similar cost and
market characteristics and meets criteria
in Governors’ Decision No. 10–1
concerning attributable costs. Id. at 3.
The Postal Service further asserts that
the functional terms of the Agreement
and the baseline agreement are the same
and the benefits are comparable. Id. at
3–4. It states that prices offered under
the Agreement may differ due to postage
commitments and when the Agreement
is signed (due to updated costing
information), but asserts that these
differences do not alter the functional
equivalency of the Agreement and the
baseline agreement. Id. at 4. The Postal
Service also identifies differences
between the terms of the two
agreements, but asserts that these
differences do not affect the
fundamental service being offered or the
fundamental structure of the
Agreement.3 Id. at 4–7.
mstockstill on DSK4VPTVN1PROD with NOTICES
III. Notice of Proceeding
The Commission establishes Docket
No. CP2013–49 for consideration of
matters raised by the Postal Service’s
Notice. Interested persons may submit
comments on whether the Agreement is
consistent with the requirements of 39
CFR 3015.5 and the policies of 39 U.S.C.
3632 and 3633. Comments are due no
later than February 19, 2013. The public
portions of this filing can be accessed
via the Commission’s Web site, https://
www.prc.gov. Information on how to
obtain access to material filed under
seal appears in 39 CFR 3007.50.
The Commission appoints Curtis E.
Kidd to serve as Public Representative
in the captioned proceeding.
IV. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket
No. CP2013–49 for consideration of
matters raised by the Postal Service’s
Notice.
2. Comments by interested persons in
this proceeding are due no later than
February 19, 2013.
3. Pursuant to 39 U.S.C. 505, Curtis E.
Kidd is appointed to serve as an officer
of the Commission (Public
Representative) to represent the
interests of the general public in this
proceeding.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2013–03505 Filed 2–14–13; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68871; File No. SR–
NYSEArca–2012–138]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change To List and
Trade PIMCO Foreign Currency
Strategy Exchange-Traded Fund Under
NYSE Arca Equities Rule 8.600
February 8, 2013.
I. Introduction
On December 6, 2012, 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 PIMCO Foreign
Currency Strategy Exchange-Traded
Fund (‘‘Fund’’) under NYSE Arca
Equities Rule 8.600. The proposed rule
change was published for comment in
the Federal Register on December 26,
2012.3 The Commission received no
comments on the proposal. This order
grants approval of the proposed rule
change.
II. Description of the Proposed Rule
Change
The Exchange proposes to list and
trade the Shares of the Fund pursuant
to 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 PIMCO
ETF Trust (‘‘Trust’’), a statutory trust
organized under the laws of the State of
Delaware and registered with the
1 15
3 Differences
include a new ‘‘Whereas’’
paragraph, numerous revisions to existing Articles,
and five new Articles. Id.
VerDate Mar<15>2010
19:09 Feb 14, 2013
Jkt 229001
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 68476
(December 19, 2012), 77 FR 76121 (‘‘Notice’’).
2 17
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
Commission as an open-end
management investment company.4 The
investment manager to the Fund is
Pacific Investment Management
Company LLC (‘‘PIMCO’’ or ‘‘Adviser’’).
PIMCO Investments LLC serves as the
distributor for the Fund. State Street
Bank & Trust Co. serves as the custodian
and transfer agent for the Fund. The
Exchange represents that the Adviser is
affiliated with a broker-dealer and has
implemented a fire wall with respect to
its broker-dealer affiliate regarding
access to information concerning the
composition and/or changes to the
portfolio.5
Principal Investment Strategies
The Fund will seek maximum total
return,6 consistent with prudent
investment management. The Fund will
invest under normal circumstances 7 at
least 80% of its assets in currencies of,
or Fixed Income Instruments 8
4 The Trust is registered under the Investment
Company Act of 1940 (‘‘1940 Act’’). On October 28,
2011, the Trust filed with the Commission an
amendment to its registration statement on Form N–
1A under the Securities Act of 1933 (‘‘Securities
Act’’) and under the 1940 Act relating to the Fund
(File Nos. 333–155395 and 811–22250)
(‘‘Registration Statement’’). In addition, the
Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act.
See Investment Company Act Release No. 28993
(November 10, 2009) (File No. 812–13571).
5 See Commentary .06 to NYSE Arca Equities
Rule 8.600. The Exchange represents that in the
event (a) the Adviser or any 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.
6 The ‘‘total return’’ sought by the Fund will
consist of income and capital appreciation, if any,
which generally arises from decreases in interest
rates, foreign currency appreciation, or improving
credit fundamentals for a particular sector or
security.
7 The term ‘‘under normal 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.
8 ‘‘Fixed Income Instruments,’’ as used generally
in the Registration Statement, includes: debt
securities issued or guaranteed by the U.S.
Government, its agencies or government-sponsored
enterprises (‘‘U.S. Government Securities’’);
corporate debt securities of U.S. and non-U.S.
issuers, including convertible securities and
corporate commercial paper; mortgage-backed and
other asset-backed securities; inflation-indexed
bonds issued both by governments and
corporations; structured notes, including hybrid or
‘‘indexed’’ securities and event-linked bonds; bank
capital and trust preferred securities; loan
participations and assignments; delayed funding
E:\FR\FM\15FEN1.SGM
15FEN1
Federal Register / Vol. 78, No. 32 / Friday, February 15, 2013 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
denominated in the currencies of,
foreign (non-U.S.) countries, including,
but not limited to, a combination of
short-term Fixed Income Instruments,
money market securities, and currency
forwards 9 backed by high-quality, low
duration securities (‘‘80% Holdings’’).10
The Fund will seek exposure to foreign
(non-U.S.) currencies likely to
outperform the U.S. dollar over the
long-term. Assets not invested in the
80% Holdings may be invested in other
types of Fixed Income Instruments (e.g.,
Fixed Income Instruments denominated
in U.S. dollars).
The Fund may invest up to 50% of its
total assets in securities and instruments
that are economically tied to emerging
market countries, which may include
assets constituting the 80% Holdings.11
PIMCO will select the Fund’s country
and currency composition based on its
evaluation of relative interest rates,
inflation rates, exchange rates, monetary
and fiscal policies, trade and current
account balances, legal and political
loans and revolving credit facilities; bank
certificates of deposit, fixed time deposits and
bankers’ acceptances; repurchase agreements on
Fixed Income Instruments and reverse repurchase
agreements on Fixed Income Instruments; debt
securities issued by states or local governments and
their agencies, authorities and other governmentsponsored enterprises; obligations of non-U.S.
governments or their subdivisions, agencies and
government-sponsored enterprises; and obligations
of international agencies or supranational entities.
Only those Fixed Income Instruments that are
denominated in foreign (non-U.S.) currencies count
towards the 80% Holdings (as defined above).
9 A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific
currency at a future date at a price set at the time
of the contract.
10 In connection with its holdings in Fixed
Income Instruments, the Fund will seek, where
possible, to use counterparties, as applicable, whose
financial status is such that the risk of default is
reduced; however, the risk of losses resulting from
default is still possible. PIMCO’s Counterparty Risk
Committee evaluates the creditworthiness of
counterparties on an ongoing basis. In addition to
information provided by credit agencies, PIMCO
credit analysts evaluate each approved counterparty
using various methods of analysis, including
company visits, earnings updates, the brokerdealer’s reputation, PIMCO’s past experience with
the broker-dealer, market levels for the
counterparty’s debt and equity, the counterparty’s
liquidity and its share of market participation.
11 PIMCO generally considers an instrument to be
economically tied to an emerging market country if
the issuer or guarantor is a government of an
emerging market country (or any political
subdivision, agency, authority or instrumentality of
such government), if the issuer or guarantor is
organized under the laws of an emerging market
country, or if the currency of settlement is a
currency of an emerging market country. PIMCO
has broad discretion to identify countries that it
considers to qualify as emerging markets. In making
investments in emerging market instruments, the
Fund emphasizes those countries with relatively
low gross national product per capita and with the
potential for rapid economic growth. Emerging
market countries are generally located in Asia,
Africa, the Middle East, Latin America, and Eastern
Europe.
VerDate Mar<15>2010
19:09 Feb 14, 2013
Jkt 229001
developments, and other specific factors
PIMCO believes to be relevant. The
Fund will normally limit its exposure to
a single non-U.S. currency (from
currency holdings or investments in
securities denominated in that currency)
to 20% of its total assets.
The average portfolio duration of the
Fund will vary based on PIMCO’s
forecast for interest rates and, under
normal market conditions, will vary
from zero to three years.12 The Fund
may invest in both high yield securities
(‘‘junk bonds’’) rated Ba, or investment
grade securities rated Baa or higher, by
Moody’s Investors Service, Inc.
(‘‘Moody’s’’), or equivalently rated by
Standard & Poor’s Ratings Services
(‘‘S&P’’) or Fitch, Inc. (‘‘Fitch’’), or, if
unrated, determined by PIMCO to be of
comparable quality.13 The Fund
currently anticipates that at least 50% of
issues of Fixed Income Instruments held
by the Fund will be rated investment
grade or determined by PIMCO to be of
comparable quality.14 The Fund is nondiversified, which means that it may
invest its assets in a smaller number of
issuers than a diversified fund.
While corporate debt securities and
debt securities economically tied to an
emerging market country generally must
have $200 million or more par amount
outstanding and significant par value
traded to be considered as an eligible
investment for the Fund, at least 80% of
issues of such securities held by the
Fund must have $200 million or more
par amount outstanding. The Fund may
12 Duration is a measure used to determine the
sensitivity of a security’s price to changes in
interest rates. The longer a security’s duration, the
more sensitive it will be to changes in interest rates.
13 Securities rated Ba or lower by Moody’s, or
equivalently rated by S&P or Fitch, are sometimes
referred to as ‘‘high yield securities’’ or ‘‘junk
bonds,’’ while securities rated Baa or higher are
referred to as ‘‘investment grade.’’ Unrated
securities may be less liquid than comparably rated
securities and involve the risk that the portfolio
manager may not accurately evaluate the security’s
comparative credit rating. To the extent that the
Fund invests in unrated securities, the Fund’s
success in achieving its investment objective may
depend more heavily on the portfolio manager’s
creditworthiness analysis than if the Fund invested
exclusively in rated securities. See note 14, infra.
14 PIMCO utilizes sophisticated proprietary
techniques in its creditworthiness analysis of
unrated securities similar to the processes utilized
by Moody’s, S&P, and Fitch in their respective
analyses of rated securities. For example, in making
a ‘‘comparable quality’’ determination for an
unrated security, PIMCO may evaluate the
likelihood of payment by the obligor, the nature and
provisions of the debt obligation, and the protection
afforded by, and relative position of, the debt
obligation in the event of bankruptcy,
reorganization, or other arrangement under laws
affecting creditors’ rights. Upon consideration of
these and other factors, PIMCO may determine that
an unrated security is of comparable quality to rated
securities in which the Fund may invest consistent
with the Fund’s credit quality guidelines described
above.
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
11239
invest up to 10% of its assets in
mortgage-backed securities or in other
asset-backed securities, although this
limitation does not apply to securities
issued or guaranteed by Federal
agencies or U.S. government sponsored
instrumentalities.
The Fund may purchase or sell
securities on a when-issued, delayed
delivery, or forward commitment basis
and may engage in short sales. The
Fund may, without limitation, seek to
obtain market exposure to the securities
in which it primarily invests by entering
into a series of purchase and sale
contracts or by using other investment
techniques (such as buy backs or dollar
rolls).
Investment Selection Techniques
In selecting investments for the Fund,
PIMCO will develop an outlook for
interest rates, currency exchange rates,
and the economy; analyze credit and
call risks; and use other asset selection
techniques. The proportion of the
Fund’s investments in securities with
particular characteristics (such as
quality, sector, interest rate, or maturity)
will vary based on PIMCO’s outlook for
the U.S. economy and the economies of
other countries in the world, the
financial markets, and other factors. In
seeking to identify undervalued
currencies, PIMCO may consider many
factors, including but not limited to
longer-term analysis of relative interest
rates, inflation rates, real exchange rates,
purchasing power parity, trade account
balances, and current account balances,
as well as other factors that influence
exchange rates such as flows, market
technical trends, and government
policies. With respect to fixed income
investing, PIMCO will attempt to
identify areas of the bond market that
are undervalued relative to the rest of
the market. PIMCO identifies these areas
by grouping Fixed Income Instruments
into sectors such as money markets,
governments, corporates, mortgages,
asset-backed, and international.
Sophisticated proprietary software then
will assist in evaluating sectors and
pricing specific investments. Once
investment opportunities are identified,
PIMCO will shift assets among sectors
depending upon changes in relative
valuations, credit spreads, and other
factors.
Additional Information Regarding
Principal Investment Strategies 15
The Fund will invest in currencies
and Fixed Income Instruments that are
15 Many of the investment strategies of the Fund
are discretionary, which means that PIMCO can
E:\FR\FM\15FEN1.SGM
Continued
15FEN1
11240
Federal Register / Vol. 78, No. 32 / Friday, February 15, 2013 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
economically tied to foreign (non-U.S.)
countries. PIMCO generally considers
an instrument to be economically tied to
a non-U.S. country if the issuer is a
foreign government (or any political
subdivision, agency, authority, or
instrumentality of such government), or
if the issuer is organized under the laws
of a non-U.S. country. In the case of
certain money market instruments, such
instruments will be considered
economically tied to a non-U.S. country
if either the issuer or the guarantor of
such money market instrument is
organized under the laws of a non-U.S.
country.
The Fund will invest in foreign
currencies and may invest in Fixed
Income Instruments denominated in
foreign (non-U.S.) currencies or receive
revenues in foreign currencies, and may
engage in foreign currency transactions
on a spot (cash) basis and enter into
forward foreign currency exchange
contracts.16 A forward foreign currency
exchange contract, which involves an
obligation to purchase or sell a specific
currency at a future date at a price set
at the time of the contract, reduces the
Fund’s exposure to changes in the value
of the currency it will deliver and
increases its exposure to changes in the
value of the currency it will receive for
the duration of the contract. Certain
foreign currency transactions may also
be settled in cash rather than the actual
delivery of the relevant currency. The
effect on the value of the Fund is similar
to selling securities denominated in one
currency and purchasing securities
denominated in another currency. A
contract to sell foreign currency would
limit any potential gain which might be
realized if the value of the hedged
currency increases. The Fund may enter
into these contracts to hedge against
foreign exchange risk, to increase
exposure to a foreign currency, or to
shift exposure to foreign currency
fluctuations from one currency to
another. Suitable hedging transactions
may not be available in all
circumstances and there can be no
assurance that the Fund will engage in
such transactions at any given time or
from time to time.
The Fund may invest in variable and
floating rate debt securities, which are
decide from time to time whether to use them or
not.
16 The Fund will limit its investments in
currencies to those currencies with a minimum
average daily foreign exchange turnover of USD $1
billion, as determined by the Bank for International
Settlements (‘‘BIS’’) Triennial Central Bank Survey.
As of the most recent BIS Triennial Central Bank
Survey, at least 52 separate currencies had
minimum average daily foreign exchange turnover
of USD $1 billion. For a list of eligible BIS
currencies, see www.bis.org.
VerDate Mar<15>2010
19:09 Feb 14, 2013
Jkt 229001
securities that pay interest at rates that
adjust whenever a specified interest rate
changes or that reset on predetermined
dates (such as the last day of a month
or calendar quarter). To the extent the
Fund invests in variable and floating
rate debt securities that are deemed
illiquid, the Fund will limit such
holdings to an amount consistent with
the 15% limitation on illiquid securities
discussed below. The Fund may invest
in floating rate debt instruments
(‘‘floaters’’) and engage in credit spread
trades. Variable and floating rate
securities generally are less sensitive to
interest rate changes, but may decline in
value if their interest rates do not rise
as much, or as quickly, as interest rates
in general. Conversely, floating rate
securities will not generally increase in
value if interest rates decline.
The Fund may invest in bank capital
securities. Bank capital securities are
issued by banks to help fulfill their
regulatory capital requirements. There
are two common types of bank capital:
Tier I and Tier II. Bank capital is
generally, but not always, of investment
grade quality. Tier I securities are
typically exchange-traded and often take
the form of trust preferred securities.
Tier II securities are commonly thought
of as hybrids of debt and preferred
stock. Tier II securities are typically
traded over-the-counter, are often
perpetual (with no maturity date), are
callable, and have a cumulative interest
deferral feature. This means that under
certain conditions, the issuer bank can
withhold payment of interest until a
later date. However, such deferred
interest payments generally earn
interest.
The Fund may make short sales as
part of its overall portfolio management
strategies or to offset a potential decline
in value of a security.
Other Portfolio Holdings and NonPrincipal Investment Strategies
For the purpose of achieving income,
the Fund may lend its portfolio
securities to brokers, dealers, and other
financial institutions, provided that a
number of conditions are satisfied,
including that the loan is fully
collateralized. When the Fund lends
portfolio securities, its investment
performance will continue to reflect
changes in the value of the securities
loaned, and the Fund will also receive
a fee or interest on the collateral. Cash
collateral received by the Fund in
securities lending transactions may be
invested in short-term liquid Fixed
Income Instruments or in money market
or short-term mutual funds or similar
investment vehicles, including affiliated
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
money market or short-term mutual
funds.
The Fund may invest in, to the extent
permitted by Section 12(d)(1)(A) of the
1940 Act, other affiliated and
unaffiliated funds, such as open-end or
closed-end management investment
companies, including other exchange
traded funds, provided that the Fund’s
investment in units or shares of
investment companies and other openend collective investment vehicles will
not exceed 10% of the Fund’s total
assets. The Fund may invest in
securities lending collateral in one or
more money market funds to the extent
permitted by Rule 12d1–1 under the
1940 Act, including series of PIMCO
Funds, an affiliated open-end
management investment company
managed by PIMCO.
Subject to the restrictions and
limitations of the 1940 Act, the Fund
may elect to pursue its investment
objective either by investing directly in
securities or instruments, or by
investing in one or more underlying
investment vehicles or companies that
have substantially similar investment
objectives and policies as the Fund.
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid securities (calculated at the time
of investment). Certain financial
instruments, including, but not limited
to, Rule 144A securities, loan
participations and assignments, delayed
funding loans, revolving credit
facilities,17 and fixed- and floating-rate
loans 18 will be included in the 15%
limitation on illiquid securities. The
Fund will monitor its portfolio liquidity
on an ongoing basis to determine
whether, in light of current
circumstances, an adequate level of
liquidity is being maintained, and the
Fund will consider taking appropriate
steps in order to maintain adequate
17 The Fund may enter into, or acquire
participations in, delayed funding loans and
revolving credit facilities, in which a lender agrees
to make loans up to a maximum amount upon
demand by the borrower during a specified term.
These commitments may have the effect of
requiring the Fund to increase its investments in a
company at a time when it might not otherwise
decide to do so (including at a time when the
company’s financial condition makes it unlikely
that such amounts will be repaid). To the extent
that the Fund is committed to advance additional
funds, it will segregate or ‘‘earmark’’ assets
determined to be liquid by PIMCO in accordance
with procedures established by the Fund’s Board of
Trustees in an amount sufficient to meet such
commitments.
18 The Fund may invest in fixed- and floating-rate
loans, which investments generally will be in the
form of loan participations and assignments of
portions of such loans. Participations and
assignments involve special types of risk, including
credit risk, interest rate risk, liquidity risk, and the
risks of being a lender.
E:\FR\FM\15FEN1.SGM
15FEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 32 / Friday, February 15, 2013 / Notices
liquidity if, through a change in values,
net assets, or other circumstances, more
than 15% of the Fund’s net assets are
held in illiquid securities. Illiquid
securities include securities subject to
contractual or other restrictions on
resale and other instruments that lack
readily available markets as determined
in accordance with Commission staff
guidance.
The Fund intends to qualify annually
and elect to be treated as a regulated
investment company under Subchapter
M of the Internal Revenue Code. The
Fund may not concentrate its
investments in a particular industry, as
that term is used in the 1940 Act, and
as interpreted, modified, or otherwise
permitted by regulatory authority
having jurisdiction from time to time.
If PIMCO believes that economic or
market conditions are unfavorable to
investors, PIMCO may temporarily
invest up to 100% of the Fund’s assets
in certain defensive strategies, including
holding a substantial portion of the
Fund’s assets in cash, cash equivalents,
or other highly rated short-term
securities, including securities issued or
guaranteed by the U.S. government, its
agencies, or instrumentalities.
The Fund will not invest in any nonU.S registered equity securities, except
if such securities are traded on
exchanges that are members of the
Intermarket Surveillance Group (‘‘ISG’’).
The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage. That is, while the
Fund will be permitted to borrow as
permitted under the 1940 Act, the
Fund’s investments will not be used to
seek performance that is the multiple or
inverse multiple (i.e., 2X and 3X) of the
Fund’s broad-based securities market
index (as defined in Form N–1A).19
The Fund will not invest in options
contracts, futures contracts, or swap
agreements, in accordance with the
Trust’s Exemptive Order.
Additional information regarding the
Trust, the Fund, and the Shares,
including investment strategies, risks,
creation and redemption procedures,
fees, portfolio holdings, disclosure
policies, distributions, and taxes is
included in the Notice and Registration
Statement.20
19 The Exchange represents that the Fund’s broadbased securities market index will be identified in
a future amendment to the Registration Statement
following the Fund’s first full calendar year of
performance.
20 See supra, notes 3 and 4, respectively.
VerDate Mar<15>2010
19:09 Feb 14, 2013
Jkt 229001
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 21
and the rules and regulations
thereunder applicable to a national
securities exchange.22 In particular, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,23 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 Fund and 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,24 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 (‘‘CTA’’) high-speed
line. In addition, the Portfolio Indicative
Value (‘‘PIV’’), as defined in NYSE Arca
Equities Rule 8.600(c)(3), will be widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Exchange’s Core
Trading Session.25 On each business
day before commencement of trading in
Shares in the Core Trading Session on
the Exchange, the Fund will disclose on
its Web site the Disclosed Portfolio,26 as
21 15
U.S.C. 78f.
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).
23 15 U.S.C. 78f(b)(5).
24 15 U.S.C. 78k–1(a)(1)(C)(iii).
25 According to the Exchange, several major
market data vendors display or make widely
available PIVs taken from CTA or other data feeds.
26 On a daily basis, the Adviser will disclose for
each portfolio security or other financial instrument
of the Fund the following information: ticker
symbol (if applicable), name of security and
financial instrument, number of shares or dollar
value of securities and financial instruments held
11241
defined in NYSE Arca Equities Rule
8.600(c)(2), that will form the basis for
the Fund’s calculation of the net asset
value (‘‘NAV’’) at the end of the
business day.27 The NAV of the Fund’s
Shares will be calculated once daily
Monday through Friday as of the close
of trading on the New York Stock
Exchange (generally, 4:00 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
information regarding the previous
day’s closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers. The Trust’s Web site
will include a form of the prospectus for
the Fund and additional data relating to
NAV and other applicable quantitative
information. Price information for the
debt securities and other financial
instruments held by the Fund will be
available through major market data
vendors. Further, a basket composition
file, which includes the security names
and share quantities, if applicable,
required to be delivered in exchange for
Fund Shares, together with estimates
and actual cash components, will be
publicly disseminated daily prior to the
opening of the New York Stock
Exchange via the National Securities
Clearing Corporation. The basket
represents one ‘‘Creation Unit’’ of the
Fund.
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.28 In
addition, the Exchange will halt trading
in the Shares under the specific
22 In
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
in the portfolio, and percentage weighting of the
security and financial instrument in the portfolio.
The Web site information will be publicly available
at no charge.
27 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’’). 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. The
Web site information will be publicly available at
no charge.
28 See NYSE Arca Equities Rule 8.600(d)(1)(B).
E:\FR\FM\15FEN1.SGM
15FEN1
11242
Federal Register / Vol. 78, No. 32 / Friday, February 15, 2013 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
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 or the
financial instruments constituting 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.29 The Exchange will
consider the suspension of trading in or
removal from listing of the Shares if the
PIV is no longer calculated or available
or the Disclosed Portfolio is not made
available to all market participants at
the same time.30 The Exchange
represents that the Adviser is affiliated
with a broker-dealer and has
implemented a fire wall with respect to
its broker-dealer affiliate regarding
access to information concerning the
composition and/or changes to the
portfolio.31 The Commission notes that
the Adviser’s personnel who make
decisions on the Fund’s portfolio
composition must be subject to
procedures designed to prevent the use
and dissemination of material, nonpublic information regarding the Fund’s
portfolio.32 Further, the Commission
notes that the Reporting Authority that
provides the Disclosed Portfolio must
implement and maintain, or be subject
29 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. 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.
30 See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
31 See supra note 5 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 (‘‘Advisers Act’’).
As a result, the Adviser and its 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.
32 See Commentary .06 to NYSE Arca Equities
Rule 8.600.
VerDate Mar<15>2010
19:09 Feb 14, 2013
Jkt 229001
to, procedures designed to prevent the
use and dissemination of material, nonpublic information regarding the actual
components of the portfolio.33 The
Exchange states that it has a general
policy prohibiting the distribution of
material, non-public information by its
employees. The Commission also notes
that the Fund will not invest in any
non-U.S.-registered equity securities,
except if such securities are traded on
exchanges that are members of the ISG,
and the Exchange would be able to
obtain surveillance information via ISG
from other exchanges that are members
of ISG or with which the Exchange has
entered into a comprehensive
surveillance sharing agreement.
The Exchange further 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 conform to the
initial and continued listing criteria
under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(3) 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.
(4) 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: (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 PIV will not be
calculated or publicly disseminated; (d)
how information regarding the PIV 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 information.
(5) For initial and continued listing,
the Fund will be in compliance with
Rule 10A–3 under the Act,34 as
provided by NYSE Arca Equities Rule
5.3.
(6) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid securities (calculated
at the time of investment). Certain
financial instruments, including, but not
limited to, Rule 144A securities, loan
participations and assignments, delayed
funding loans, revolving credit facilities,
and fixed- and floating-rate loans will be
included in the 15% limitation on
illiquid securities.
(7) The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage.
(8) The Fund will normally limit its
exposure to a single non-U.S. currency
(from currency holdings or investments
in securities denominated in that
currency) to 20% of its total assets. The
Fund currently anticipates that at least
50% of issues of Fixed Income
Instruments held by the Fund will be
rated investment grade or determined by
PIMCO to be of comparable quality. In
addition, while corporate debt securities
and debt securities economically tied to
an emerging market country generally
must have $200 million or more par
amount outstanding and significant par
value traded to be considered as an
eligible investment for the Fund, at least
80% of issues of such securities held by
the Fund must have $200 million or
more par amount outstanding.
(9) The Fund will not invest in any
non-U.S.-registered equity securities,
except if such securities are traded on
exchanges that are members of the ISG.
The Exchange would be able to obtain
surveillance information via ISG from
other exchanges that are members of ISG
or with which the Exchange has entered
into a comprehensive surveillance
sharing agreement.
(10) The Fund will not invest in
options contracts, futures contracts, or
swap agreements, in accordance with
the Trust’s Exemptive Order.
(11) 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 and
description of the Fund, including those
set forth above and in the Notice.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 35 and the rules and
34 See
33 See
PO 00000
NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
Frm 00110
Fmt 4703
Sfmt 4703
35 15
E:\FR\FM\15FEN1.SGM
17 CFR 240.10A–3.
U.S.C. 78f(b)(5).
15FEN1
Federal Register / Vol. 78, No. 32 / Friday, February 15, 2013 / Notices
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,36 that the
proposed rule change (SR–NYSEArca–
2012–138) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–03490 Filed 2–14–13; 8:45 am]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68901; File No. SR–CBOE–
2013–018]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Amend the Fees
Schedule
February 11, 2013.
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 February
1, 2013, Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
mstockstill on DSK4VPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to amend
the Fees Schedule. The text of the
proposed rule change is available on the
Exchange’s Web site (https://
www.cboe.com/AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission.
36 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
37 17
VerDate Mar<15>2010
19:09 Feb 14, 2013
Jkt 229001
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1. Purpose
The Exchange is proposing to amend
its Fee Schedule. Specifically, the
Exchange is proposing to increase the
threshold in which it waives customer
transaction fees, implement a $0.25
marketing fee for trading in SPY and
QQQ options, and eliminate the
complex order surcharge.
First, the Exchange is proposing to
increase the threshold at which the
Exchange waives the customer
transaction fee in ‘‘ETF, ETN and
HOLDRs Options.’’ Currently, the
Exchange waives transaction fees for
customer orders of 99 contracts or less
in transactions in ETFs, ETNs, and
HOLDRs options. Any order that is 100
contracts or more is charged a fee of
$0.18. The Exchange is proposing to
increase this threshold and waive
transaction fees for customer orders of
249 contracts or less in these options.
The Exchange will charge any leg of a
complex orders in these options that
exceeds 249 even if the leg is only
partially executed below the 249
threshold. For orders 250 contracts and
above, the Exchange will continue to
charge a fee of $0.18. Corresponding
edits will also be made to Footnote 9 in
the Fees Schedule to reflect the change.
Raising the threshold for which the
Exchange will waive transaction fees
will allow customers who engage in
ETF, ETN and HOLDRs options trading
the opportunity to pay lower fees for
larger transactions and provide greater
incentives for such trading. In addition,
increasing this threshold will encourage
more interaction with Exchange
customers and encourage the direction
of customer ETF, ETN and HOLDRs
options orders to the Exchange.
Next, the Exchange is proposing to
implement a $0.25 marketing fee for
electronic trading in SPY and QQQ
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
11243
options. Currently, the Marketing Fee
assessed on all Penny Pilot ExchangeTraded Fund (‘‘ETF’’) options is $0.25
per contract, with the exception of SPY
and QQQ. The Exchange only charges a
$0.25 fee per contract in SPY and QQQ
options for qualifying complex orders
that trade via the Exchange Complex
Order Book against individual leg
markets. The Exchange is proposing to
amend the Fees Schedule to assess this
$0.25 fee per contract on all qualifying
orders whether simple or complex. This
change will place SPY and QQQ on the
same footing regarding the Marketing
Fee as other options in the Penny Pilot
classes. Other exchanges assess their
marketing fees on SPY and QQQ.3 To
correspond with this proposed change,
the Exchange also proposes to eliminate
the ‘‘Notes’’ section of the ‘‘Marketing
Fee’’ table of the Fees Schedule to
reflect this change.4
Finally, the Exchange is proposing to
eliminate the surcharge on complex
orders. Currently, the Exchange has a
$0.10 surcharge per contract for the
electronic execution leg of a complex
order in multiply-listed options that
executes against a customer complex
order. This surcharge is in addition to
the other transaction fees. The Exchange
is proposing to eliminate this surcharge.
Eliminating the surcharge for complex
orders will allow Trading Permit
Holders (‘‘TPHs’’) who engage in
complex order trading the opportunity
to pay lower fees for such transactions
and provide greater incentives for such
trading. In addition, eliminating the
$0.10 surcharge will encourage more
interaction with Exchange customers.
Thus, the proposed changes are
designed to attract greater order flow to
the Exchange. This would bring greater
liquidity to the market, which benefits
all market participants. The propose
changes are to take effect on February 1,
2013
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
3 See Section II, ‘‘Payment for Order Flow Fees,’’
of the Nasdaq OMX PHLX (‘‘Phlx’’) Fee Schedule.
4 The ‘‘Notes’’ section of the ‘‘Marketing Fee’’
table reads ‘‘The marketing fee will not be assessed
on electronic transactions in SPY and QQQ, except
for electronic transactions resulting from AIM and
complex orders that trade in either COA or COB
(excluding complex orders that trade against the leg
markets, on which the marketing fee will not be
assessed). The marketing fee will continue to be
assessed on open outcry transactions in SPY and
QQQ.’’ Because the Exchange proposes to assess the
Marketing Fee to SPY and QQQ in the same manner
as it applies to other Penny Pilot classes the SPYand QQQ-specific specifications set out in the
‘‘Notes’’ section are no longer relevant and can be
deleted.
E:\FR\FM\15FEN1.SGM
15FEN1
]]>Agencies
[Federal Register Volume 78, Number 32 (Friday, February 15, 2013)]
[Notices]
[Pages 11238-11243]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03490]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68871; File No. SR-NYSEArca-2012-138]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change To List and Trade PIMCO Foreign
Currency Strategy Exchange-Traded Fund Under NYSE Arca Equities Rule
8.600
February 8, 2013.
I. Introduction
On December 6, 2012, 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 PIMCO
Foreign Currency Strategy Exchange-Traded Fund (``Fund'') under NYSE
Arca Equities Rule 8.600. The proposed rule change was published for
comment in the Federal Register on December 26, 2012.\3\ The Commission
received no comments 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. 68476 (December 19,
2012), 77 FR 76121 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to list and trade the Shares of the Fund
pursuant to 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 PIMCO ETF Trust (``Trust''), a statutory trust organized
under the laws of the State of Delaware and registered with the
Commission as an open-end management investment company.\4\ The
investment manager to the Fund is Pacific Investment Management Company
LLC (``PIMCO'' or ``Adviser''). PIMCO Investments LLC serves as the
distributor for the Fund. State Street Bank & Trust Co. serves as the
custodian and transfer agent for the Fund. The Exchange represents that
the Adviser is affiliated with a broker-dealer and has implemented a
fire wall with respect to its broker-dealer affiliate regarding access
to information concerning the composition and/or changes to the
portfolio.\5\
---------------------------------------------------------------------------
\4\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). On October 28, 2011, the Trust filed with the
Commission an amendment to its registration statement on Form N-1A
under the Securities Act of 1933 (``Securities Act'') and under the
1940 Act relating to the Fund (File Nos. 333-155395 and 811-22250)
(``Registration Statement''). In addition, the Commission has issued
an order granting certain exemptive relief to the Trust under the
1940 Act. See Investment Company Act Release No. 28993 (November 10,
2009) (File No. 812-13571).
\5\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The
Exchange represents that in the event (a) the Adviser or any 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.
---------------------------------------------------------------------------
Principal Investment Strategies
The Fund will seek maximum total return,\6\ consistent with prudent
investment management. The Fund will invest under normal circumstances
\7\ at least 80% of its assets in currencies of, or Fixed Income
Instruments \8\
[[Page 11239]]
denominated in the currencies of, foreign (non-U.S.) countries,
including, but not limited to, a combination of short-term Fixed Income
Instruments, money market securities, and currency forwards \9\ backed
by high-quality, low duration securities (``80% Holdings'').\10\ The
Fund will seek exposure to foreign (non-U.S.) currencies likely to
outperform the U.S. dollar over the long-term. Assets not invested in
the 80% Holdings may be invested in other types of Fixed Income
Instruments (e.g., Fixed Income Instruments denominated in U.S.
dollars).
---------------------------------------------------------------------------
\6\ The ``total return'' sought by the Fund will consist of
income and capital appreciation, if any, which generally arises from
decreases in interest rates, foreign currency appreciation, or
improving credit fundamentals for a particular sector or security.
\7\ The term ``under normal 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.
\8\ ``Fixed Income Instruments,'' as used generally in the
Registration Statement, includes: debt securities issued or
guaranteed by the U.S. Government, its agencies or government-
sponsored enterprises (``U.S. Government Securities''); corporate
debt securities of U.S. and non-U.S. issuers, including convertible
securities and corporate commercial paper; mortgage-backed and other
asset-backed securities; inflation-indexed bonds issued both by
governments and corporations; structured notes, including hybrid or
``indexed'' securities and event-linked bonds; bank capital and
trust preferred securities; loan participations and assignments;
delayed funding loans and revolving credit facilities; bank
certificates of deposit, fixed time deposits and bankers'
acceptances; repurchase agreements on Fixed Income Instruments and
reverse repurchase agreements on Fixed Income Instruments; debt
securities issued by states or local governments and their agencies,
authorities and other government-sponsored enterprises; obligations
of non-U.S. governments or their subdivisions, agencies and
government-sponsored enterprises; and obligations of international
agencies or supranational entities. Only those Fixed Income
Instruments that are denominated in foreign (non-U.S.) currencies
count towards the 80% Holdings (as defined above).
\9\ A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date
at a price set at the time of the contract.
\10\ In connection with its holdings in Fixed Income
Instruments, the Fund will seek, where possible, to use
counterparties, as applicable, whose financial status is such that
the risk of default is reduced; however, the risk of losses
resulting from default is still possible. PIMCO's Counterparty Risk
Committee evaluates the creditworthiness of counterparties on an
ongoing basis. In addition to information provided by credit
agencies, PIMCO credit analysts evaluate each approved counterparty
using various methods of analysis, including company visits,
earnings updates, the broker-dealer's reputation, PIMCO's past
experience with the broker-dealer, market levels for the
counterparty's debt and equity, the counterparty's liquidity and its
share of market participation.
---------------------------------------------------------------------------
The Fund may invest up to 50% of its total assets in securities and
instruments that are economically tied to emerging market countries,
which may include assets constituting the 80% Holdings.\11\ PIMCO will
select the Fund's country and currency composition based on its
evaluation of relative interest rates, inflation rates, exchange rates,
monetary and fiscal policies, trade and current account balances, legal
and political developments, and other specific factors PIMCO believes
to be relevant. The Fund will normally limit its exposure to a single
non-U.S. currency (from currency holdings or investments in securities
denominated in that currency) to 20% of its total assets.
---------------------------------------------------------------------------
\11\ PIMCO generally considers an instrument to be economically
tied to an emerging market country if the issuer or guarantor is a
government of an emerging market country (or any political
subdivision, agency, authority or instrumentality of such
government), if the issuer or guarantor is organized under the laws
of an emerging market country, or if the currency of settlement is a
currency of an emerging market country. PIMCO has broad discretion
to identify countries that it considers to qualify as emerging
markets. In making investments in emerging market instruments, the
Fund emphasizes those countries with relatively low gross national
product per capita and with the potential for rapid economic growth.
Emerging market countries are generally located in Asia, Africa, the
Middle East, Latin America, and Eastern Europe.
---------------------------------------------------------------------------
The average portfolio duration of the Fund will vary based on
PIMCO's forecast for interest rates and, under normal market
conditions, will vary from zero to three years.\12\ The Fund may invest
in both high yield securities (``junk bonds'') rated Ba, or investment
grade securities rated Baa or higher, by Moody's Investors Service,
Inc. (``Moody's''), or equivalently rated by Standard & Poor's Ratings
Services (``S&P'') or Fitch, Inc. (``Fitch''), or, if unrated,
determined by PIMCO to be of comparable quality.\13\ The Fund currently
anticipates that at least 50% of issues of Fixed Income Instruments
held by the Fund will be rated investment grade or determined by PIMCO
to be of comparable quality.\14\ The Fund is non-diversified, which
means that it may invest its assets in a smaller number of issuers than
a diversified fund.
---------------------------------------------------------------------------
\12\ Duration is a measure used to determine the sensitivity of
a security's price to changes in interest rates. The longer a
security's duration, the more sensitive it will be to changes in
interest rates.
\13\ Securities rated Ba or lower by Moody's, or equivalently
rated by S&P or Fitch, are sometimes referred to as ``high yield
securities'' or ``junk bonds,'' while securities rated Baa or higher
are referred to as ``investment grade.'' Unrated securities may be
less liquid than comparably rated securities and involve the risk
that the portfolio manager may not accurately evaluate the
security's comparative credit rating. To the extent that the Fund
invests in unrated securities, the Fund's success in achieving its
investment objective may depend more heavily on the portfolio
manager's creditworthiness analysis than if the Fund invested
exclusively in rated securities. See note 14, infra.
\14\ PIMCO utilizes sophisticated proprietary techniques in its
creditworthiness analysis of unrated securities similar to the
processes utilized by Moody's, S&P, and Fitch in their respective
analyses of rated securities. For example, in making a ``comparable
quality'' determination for an unrated security, PIMCO may evaluate
the likelihood of payment by the obligor, the nature and provisions
of the debt obligation, and the protection afforded by, and relative
position of, the debt obligation in the event of bankruptcy,
reorganization, or other arrangement under laws affecting creditors'
rights. Upon consideration of these and other factors, PIMCO may
determine that an unrated security is of comparable quality to rated
securities in which the Fund may invest consistent with the Fund's
credit quality guidelines described above.
---------------------------------------------------------------------------
While corporate debt securities and debt securities economically
tied to an emerging market country generally must have $200 million or
more par amount outstanding and significant par value traded to be
considered as an eligible investment for the Fund, at least 80% of
issues of such securities held by the Fund must have $200 million or
more par amount outstanding. The Fund may invest up to 10% of its
assets in mortgage-backed securities or in other asset-backed
securities, although this limitation does not apply to securities
issued or guaranteed by Federal agencies or U.S. government sponsored
instrumentalities.
The Fund may purchase or sell securities on a when-issued, delayed
delivery, or forward commitment basis and may engage in short sales.
The Fund may, without limitation, seek to obtain market exposure to the
securities in which it primarily invests by entering into a series of
purchase and sale contracts or by using other investment techniques
(such as buy backs or dollar rolls).
Investment Selection Techniques
In selecting investments for the Fund, PIMCO will develop an
outlook for interest rates, currency exchange rates, and the economy;
analyze credit and call risks; and use other asset selection
techniques. The proportion of the Fund's investments in securities with
particular characteristics (such as quality, sector, interest rate, or
maturity) will vary based on PIMCO's outlook for the U.S. economy and
the economies of other countries in the world, the financial markets,
and other factors. In seeking to identify undervalued currencies, PIMCO
may consider many factors, including but not limited to longer-term
analysis of relative interest rates, inflation rates, real exchange
rates, purchasing power parity, trade account balances, and current
account balances, as well as other factors that influence exchange
rates such as flows, market technical trends, and government policies.
With respect to fixed income investing, PIMCO will attempt to identify
areas of the bond market that are undervalued relative to the rest of
the market. PIMCO identifies these areas by grouping Fixed Income
Instruments into sectors such as money markets, governments,
corporates, mortgages, asset-backed, and international. Sophisticated
proprietary software then will assist in evaluating sectors and pricing
specific investments. Once investment opportunities are identified,
PIMCO will shift assets among sectors depending upon changes in
relative valuations, credit spreads, and other factors.
Additional Information Regarding Principal Investment Strategies \15\
---------------------------------------------------------------------------
\15\ Many of the investment strategies of the Fund are
discretionary, which means that PIMCO can decide from time to time
whether to use them or not.
---------------------------------------------------------------------------
The Fund will invest in currencies and Fixed Income Instruments
that are
[[Page 11240]]
economically tied to foreign (non-U.S.) countries. PIMCO generally
considers an instrument to be economically tied to a non-U.S. country
if the issuer is a foreign government (or any political subdivision,
agency, authority, or instrumentality of such government), or if the
issuer is organized under the laws of a non-U.S. country. In the case
of certain money market instruments, such instruments will be
considered economically tied to a non-U.S. country if either the issuer
or the guarantor of such money market instrument is organized under the
laws of a non-U.S. country.
The Fund will invest in foreign currencies and may invest in Fixed
Income Instruments denominated in foreign (non-U.S.) currencies or
receive revenues in foreign currencies, and may engage in foreign
currency transactions on a spot (cash) basis and enter into forward
foreign currency exchange contracts.\16\ A forward foreign currency
exchange contract, which involves an obligation to purchase or sell a
specific currency at a future date at a price set at the time of the
contract, reduces the Fund's exposure to changes in the value of the
currency it will deliver and increases its exposure to changes in the
value of the currency it will receive for the duration of the contract.
Certain foreign currency transactions may also be settled in cash
rather than the actual delivery of the relevant currency. The effect on
the value of the Fund is similar to selling securities denominated in
one currency and purchasing securities denominated in another currency.
A contract to sell foreign currency would limit any potential gain
which might be realized if the value of the hedged currency increases.
The Fund may enter into these contracts to hedge against foreign
exchange risk, to increase exposure to a foreign currency, or to shift
exposure to foreign currency fluctuations from one currency to another.
Suitable hedging transactions may not be available in all circumstances
and there can be no assurance that the Fund will engage in such
transactions at any given time or from time to time.
---------------------------------------------------------------------------
\16\ The Fund will limit its investments in currencies to those
currencies with a minimum average daily foreign exchange turnover of
USD $1 billion, as determined by the Bank for International
Settlements (``BIS'') Triennial Central Bank Survey. As of the most
recent BIS Triennial Central Bank Survey, at least 52 separate
currencies had minimum average daily foreign exchange turnover of
USD $1 billion. For a list of eligible BIS currencies, see
www.bis.org.
---------------------------------------------------------------------------
The Fund may invest in variable and floating rate debt securities,
which are securities that pay interest at rates that adjust whenever a
specified interest rate changes or that reset on predetermined dates
(such as the last day of a month or calendar quarter). To the extent
the Fund invests in variable and floating rate debt securities that are
deemed illiquid, the Fund will limit such holdings to an amount
consistent with the 15% limitation on illiquid securities discussed
below. The Fund may invest in floating rate debt instruments
(``floaters'') and engage in credit spread trades. Variable and
floating rate securities generally are less sensitive to interest rate
changes, but may decline in value if their interest rates do not rise
as much, or as quickly, as interest rates in general. Conversely,
floating rate securities will not generally increase in value if
interest rates decline.
The Fund may invest in bank capital securities. Bank capital
securities are issued by banks to help fulfill their regulatory capital
requirements. There are two common types of bank capital: Tier I and
Tier II. Bank capital is generally, but not always, of investment grade
quality. Tier I securities are typically exchange-traded and often take
the form of trust preferred securities. Tier II securities are commonly
thought of as hybrids of debt and preferred stock. Tier II securities
are typically traded over-the-counter, are often perpetual (with no
maturity date), are callable, and have a cumulative interest deferral
feature. This means that under certain conditions, the issuer bank can
withhold payment of interest until a later date. However, such deferred
interest payments generally earn interest.
The Fund may make short sales as part of its overall portfolio
management strategies or to offset a potential decline in value of a
security.
Other Portfolio Holdings and Non-Principal Investment Strategies
For the purpose of achieving income, the Fund may lend its
portfolio securities to brokers, dealers, and other financial
institutions, provided that a number of conditions are satisfied,
including that the loan is fully collateralized. When the Fund lends
portfolio securities, its investment performance will continue to
reflect changes in the value of the securities loaned, and the Fund
will also receive a fee or interest on the collateral. Cash collateral
received by the Fund in securities lending transactions may be invested
in short-term liquid Fixed Income Instruments or in money market or
short-term mutual funds or similar investment vehicles, including
affiliated money market or short-term mutual funds.
The Fund may invest in, to the extent permitted by Section
12(d)(1)(A) of the 1940 Act, other affiliated and unaffiliated funds,
such as open-end or closed-end management investment companies,
including other exchange traded funds, provided that the Fund's
investment in units or shares of investment companies and other open-
end collective investment vehicles will not exceed 10% of the Fund's
total assets. The Fund may invest in securities lending collateral in
one or more money market funds to the extent permitted by Rule 12d1-1
under the 1940 Act, including series of PIMCO Funds, an affiliated
open-end management investment company managed by PIMCO.
Subject to the restrictions and limitations of the 1940 Act, the
Fund may elect to pursue its investment objective either by investing
directly in securities or instruments, or by investing in one or more
underlying investment vehicles or companies that have substantially
similar investment objectives and policies as the Fund.
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment).
Certain financial instruments, including, but not limited to, Rule 144A
securities, loan participations and assignments, delayed funding loans,
revolving credit facilities,\17\ and fixed- and floating-rate loans
\18\ will be included in the 15% limitation on illiquid securities. The
Fund will monitor its portfolio liquidity on an ongoing basis to
determine whether, in light of current circumstances, an adequate level
of liquidity is being maintained, and the Fund will consider taking
appropriate steps in order to maintain adequate
[[Page 11241]]
liquidity if, through a change in values, net assets, or other
circumstances, more than 15% of the Fund's net assets are held in
illiquid securities. Illiquid securities include securities subject to
contractual or other restrictions on resale and other instruments that
lack readily available markets as determined in accordance with
Commission staff guidance.
---------------------------------------------------------------------------
\17\ The Fund may enter into, or acquire participations in,
delayed funding loans and revolving credit facilities, in which a
lender agrees to make loans up to a maximum amount upon demand by
the borrower during a specified term. These commitments may have the
effect of requiring the Fund to increase its investments in a
company at a time when it might not otherwise decide to do so
(including at a time when the company's financial condition makes it
unlikely that such amounts will be repaid). To the extent that the
Fund is committed to advance additional funds, it will segregate or
``earmark'' assets determined to be liquid by PIMCO in accordance
with procedures established by the Fund's Board of Trustees in an
amount sufficient to meet such commitments.
\18\ The Fund may invest in fixed- and floating-rate loans,
which investments generally will be in the form of loan
participations and assignments of portions of such loans.
Participations and assignments involve special types of risk,
including credit risk, interest rate risk, liquidity risk, and the
risks of being a lender.
---------------------------------------------------------------------------
The Fund intends to qualify annually and elect to be treated as a
regulated investment company under Subchapter M of the Internal Revenue
Code. The Fund may not concentrate its investments in a particular
industry, as that term is used in the 1940 Act, and as interpreted,
modified, or otherwise permitted by regulatory authority having
jurisdiction from time to time.
If PIMCO believes that economic or market conditions are
unfavorable to investors, PIMCO may temporarily invest up to 100% of
the Fund's assets in certain defensive strategies, including holding a
substantial portion of the Fund's assets in cash, cash equivalents, or
other highly rated short-term securities, including securities issued
or guaranteed by the U.S. government, its agencies, or
instrumentalities.
The Fund will not invest in any non-U.S registered equity
securities, except if such securities are traded on exchanges that are
members of the Intermarket Surveillance Group (``ISG'').
The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage. That is,
while the Fund will be permitted to borrow as permitted under the 1940
Act, the Fund's investments will not be used to seek performance that
is the multiple or inverse multiple (i.e., 2X and 3X) of the Fund's
broad-based securities market index (as defined in Form N-1A).\19\
---------------------------------------------------------------------------
\19\ The Exchange represents that the Fund's broad-based
securities market index will be identified in a future amendment to
the Registration Statement following the Fund's first full calendar
year of performance.
---------------------------------------------------------------------------
The Fund will not invest in options contracts, futures contracts,
or swap agreements, in accordance with the Trust's Exemptive Order.
Additional information regarding the Trust, the Fund, and the
Shares, including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings, disclosure policies,
distributions, and taxes is included in the Notice and Registration
Statement.\20\
---------------------------------------------------------------------------
\20\ See supra, notes 3 and 4, 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 \21\ and the rules and regulations thereunder applicable to a
national securities exchange.\22\ In particular, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\23\
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 Fund and the Shares must comply with the requirements of NYSE Arca
Equities Rule 8.600 to be listed and traded on the Exchange.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f.
\22\ 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).
\23\ 15 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,\24\ 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 (``CTA'') high-speed line. In addition, the Portfolio
Indicative Value (``PIV''), as defined in NYSE Arca Equities Rule
8.600(c)(3), will be widely disseminated by one or more major market
data vendors at least every 15 seconds during the Exchange's Core
Trading Session.\25\ On each business day before commencement of
trading in Shares in the Core Trading Session on the Exchange, the Fund
will disclose on its Web site the Disclosed Portfolio,\26\ as defined
in NYSE Arca Equities Rule 8.600(c)(2), that will form the basis for
the Fund's calculation of the net asset value (``NAV'') at the end of
the business day.\27\ The NAV of the Fund's Shares will be calculated
once daily Monday through Friday as of the close of trading on the New
York Stock Exchange (generally, 4:00 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
information regarding the previous day's closing price and trading
volume information for the Shares will be published daily in the
financial section of newspapers. The Trust's Web site will include a
form of the prospectus for the Fund and additional data relating to NAV
and other applicable quantitative information. Price information for
the debt securities and other financial instruments held by the Fund
will be available through major market data vendors. Further, a basket
composition file, which includes the security names and share
quantities, if applicable, required to be delivered in exchange for
Fund Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the New York
Stock Exchange via the National Securities Clearing Corporation. The
basket represents one ``Creation Unit'' of the Fund.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\25\ According to the Exchange, several major market data
vendors display or make widely available PIVs taken from CTA or
other data feeds.
\26\ On a daily basis, the Adviser will disclose for each
portfolio security or other financial instrument of the Fund the
following information: ticker symbol (if applicable), name of
security and financial instrument, number of shares or dollar value
of securities and financial instruments held in the portfolio, and
percentage weighting of the security and financial instrument in the
portfolio. The Web site information will be publicly available at no
charge.
\27\ 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''). 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. The Web site information will be publicly
available at no charge.
---------------------------------------------------------------------------
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.\28\
In addition, the Exchange will halt trading in the Shares under the
specific
[[Page 11242]]
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 or the financial instruments constituting 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.\29\ The Exchange will consider the suspension of trading in or
removal from listing of the Shares if the PIV is no longer calculated
or available or the Disclosed Portfolio is not made available to all
market participants at the same time.\30\ The Exchange represents that
the Adviser is affiliated with a broker-dealer and has implemented a
fire wall with respect to its broker-dealer affiliate regarding access
to information concerning the composition and/or changes to the
portfolio.\31\ The Commission notes that the Adviser's personnel who
make decisions on the Fund's portfolio composition must be subject to
procedures designed to prevent the use and dissemination of material,
non-public information regarding the Fund's portfolio.\32\ Further, the
Commission notes that the Reporting Authority that provides the
Disclosed Portfolio must implement and maintain, or be subject to,
procedures designed to prevent the use and dissemination of material,
non-public information regarding the actual components of the
portfolio.\33\ The Exchange states that it has a general policy
prohibiting the distribution of material, non-public information by its
employees. The Commission also notes that the Fund will not invest in
any non-U.S.-registered equity securities, except if such securities
are traded on exchanges that are members of the ISG, and the Exchange
would be able to obtain surveillance information via ISG from other
exchanges that are members of ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------
\28\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
\29\ 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. 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.
\30\ See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
\31\ See supra note 5 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 (``Advisers
Act''). As a result, the Adviser and its 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.
\32\ See Commentary .06 to NYSE Arca Equities Rule 8.600.
\33\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
---------------------------------------------------------------------------
The Exchange further 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 conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) 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.
(4) 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: (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 PIV will not be calculated or publicly
disseminated; (d) how information regarding the PIV 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 information.
(5) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act,\34\ as provided by NYSE Arca
Equities Rule 5.3.
---------------------------------------------------------------------------
\34\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(6) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment).
Certain financial instruments, including, but not limited to, Rule 144A
securities, loan participations and assignments, delayed funding loans,
revolving credit facilities, and fixed- and floating-rate loans will be
included in the 15% limitation on illiquid securities.
(7) The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage.
(8) The Fund will normally limit its exposure to a single non-U.S.
currency (from currency holdings or investments in securities
denominated in that currency) to 20% of its total assets. The Fund
currently anticipates that at least 50% of issues of Fixed Income
Instruments held by the Fund will be rated investment grade or
determined by PIMCO to be of comparable quality. In addition, while
corporate debt securities and debt securities economically tied to an
emerging market country generally must have $200 million or more par
amount outstanding and significant par value traded to be considered as
an eligible investment for the Fund, at least 80% of issues of such
securities held by the Fund must have $200 million or more par amount
outstanding.
(9) The Fund will not invest in any non-U.S.-registered equity
securities, except if such securities are traded on exchanges that are
members of the ISG. The Exchange would be able to obtain surveillance
information via ISG from other exchanges that are members of ISG or
with which the Exchange has entered into a comprehensive surveillance
sharing agreement.
(10) The Fund will not invest in options contracts, futures
contracts, or swap agreements, in accordance with the Trust's Exemptive
Order.
(11) 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 and
description of the Fund, including those set forth above and in the
Notice.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \35\ and the
rules and
[[Page 11243]]
regulations thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------
\35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\36\ that the proposed rule change (SR-NYSEArca-2012-138) be, and
it hereby is, approved.
---------------------------------------------------------------------------
\36\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
---------------------------------------------------------------------------
\37\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03490 Filed 2-14-13; 8:45 am]
BILLING CODE 8011-01-P
